PURNA PURSHOTTAM EXPORTS ,MUMBAI vs. ACIT CENTRAL CIRCLE,2(2), MUMBAI
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Income Tax Appellate Tribunal, MUMBAI BENCH “C” MUMBAI
Before: SHRI OM PRAKASH KANT & SHRI SANDEEP SINGH KARHAIL
PER OM PRAKASH KANT, AM
These appeals by the assessee are directed against two separate orders, both dated 05.04.2023, passed by the Ld.
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Commissioner of Income Commissioner of Income-tax (Appeals) – 48, Mumbai [in short ‘the 48, Mumbai [in short ‘the Ld. CIT(A)’] for assessment years 2008 Ld. CIT(A)’] for assessment years 2008-09 and 2018 09 and 2018-19. As both appeal being connected with the same assessee, were heard appeal being connected with the same assessee appeal being connected with the same assessee together and disposed of by way of this consolidated order for together and disposed of by way of this consolidated order for together and disposed of by way of this consolidated order for convenience and avoid repetition of facts. ence and avoid repetition of facts.
Firstly, we take up the appeal of the assessee for assessment Firstly, we take up the appeal of the assessee for assessment Firstly, we take up the appeal of the assessee for assessment year 2008-09. The relevant grounds raised by the assessee are 09. The relevant grounds raised by the assessee are 09. The relevant grounds raised by the assessee are reproduced as under: reproduced as under:
The Ld. CIT(A) erred in upholding the validity of notice issued The Ld. CIT(A) erred in upholding the validity of notice issued The Ld. CIT(A) erred in upholding the validity of notice issued under s under section 148 of Income tax Act, 1961 (herein after ection 148 of Income tax Act, 1961 (herein after referred to as "the Act) without appreciating the fact that no referred to as "the Act) without appreciating the fact that no referred to as "the Act) without appreciating the fact that no valid reasons were recorded before the issuing the said notice. valid reasons were recorded before the issuing the said notice. valid reasons were recorded before the issuing the said notice. The notice issued under section 148 dated 27.03.2014 lacks The notice issued under section 148 dated 27.03.2014 lacks The notice issued under section 148 dated 27.03.2014 lacks jurisdiction and the jurisdiction and the assessment order dated 23.03.2015 is assessment order dated 23.03.2015 is bad-in law and void in law and void-ab-initio. The CIT(A) failed to appreciate initio. The CIT(A) failed to appreciate that there was no failure on the part of Appellant to disclose that there was no failure on the part of Appellant to disclose that there was no failure on the part of Appellant to disclose material particulars and facts in the return of income, thus material particulars and facts in the return of income, thus material particulars and facts in the return of income, thus reopening after period reopening after period 4 years by AO is invalid. 2. 2. The Ld. CIT(A) failed to appreciate that the A.O. has 2. The Ld. CIT(A) failed to appreciate that the A.O. has 2. The Ld. CIT(A) failed to appreciate that the A.O. has recorded the reasons on the recorded the reasons on the basis ol borrowed satisfaction. basis ol borrowed satisfaction. The reasons recorded on the basis of a report sent by the The reasons recorded on the basis of a report sent by the The reasons recorded on the basis of a report sent by the investigation wing without making any further enquiry on his investigation wing without making any further enquiry on his investigation wing without making any further enquiry on his own by the AO amounts to a borrowed satisfaction. Thus, the by the AO amounts to a borrowed satisfaction. Thus, the by the AO amounts to a borrowed satisfaction. Thus, the satisfaction that he has a satisfaction that he has a reason to believe that income has reason to believe that income has escaped assessment as recorded in the reasons recorded is a escaped assessment as recorded in the reasons recorded is a escaped assessment as recorded in the reasons recorded is a borrowed satisfaction and not of his own satisfaction. Thus, borrowed satisfaction and not of his own satisfaction. Thus, borrowed satisfaction and not of his own satisfaction. Thus, the reasons recor the reasons recorded are not valid reasons recorded to issue ded are not valid reasons recorded to issue notice under section 148 of the Act. Thus, the notice issued notice under section 148 of the Act. Thus, the notice issued notice under section 148 of the Act. Thus, the notice issued under section 148 dated 27.03.2014 and the assessment under section 148 dated 27.03.2014 and the assessment under section 148 dated 27.03.2014 and the assessment order dated 23.03.2015 are bad order dated 23.03.2015 are bad-in-law and void-ab- -initio. 3. 3. The Ld. CIT(A) erred in confirming t 3. The Ld. CIT(A) erred in confirming the addition of Rs. he addition of Rs. 1,57,77,971/ 1,57,77,971/- made by the A.O. under section 69C of the Act A.O. under section 69C of the Act treating genuine purchases as bogus purchases on the basis of treating genuine purchases as bogus purchases on the basis of treating genuine purchases as bogus purchases on the basis of conjecture conjecture conjecture and and and surmises. surmises. surmises. Thus, Thus, Thus, the the the addition addition addition of of of Rs. Rs. Rs. 1,57,77,971/ 1,57,77,971/-is not at all justified. 4. 4. The Ld. CIT(A) has fail 4. The Ld. CIT(A) has failed to appreciate that provisions of ed to appreciate that provisions of section 69C are not applicable as source of expenditure section 69C are not applicable as source of expenditure section 69C are not applicable as source of expenditure incurred is explained by Appellant along with incurred is explained by Appellant along with necessary supporting documents. supporting documents. 5. 5. The Ld. CIT( 5. The Ld. CIT(A) failed to appreciate that the A.O. has relied A) failed to appreciate that the A.O. has relied on the statements of the third party without providing any on the statements of the third party without providing any on the statements of the third party without providing any
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opportunity to the Appellant to cross opportunity to the Appellant to cross-examine the said person. examine the said person. Thus, the addition of Rs. 1,57,77,971/ Thus, the addition of Rs. 1,57,77,971/- made relying on the made relying on the statement of a third part statement of a third party without granting cross examination y without granting cross examination is not justified as the same is in breach of principles of natural is not justified as the same is in breach of principles of natural is not justified as the same is in breach of principles of natural justice and the same may be deleted. justice and the same may be deleted. 6. 6. Without prejudice to the above the Ld. CIT(A) failed to 6. Without prejudice to the above the Ld. CIT(A) failed to 6. Without prejudice to the above the Ld. CIT(A) failed to appreciate that the A.O. has erred in treating the genui appreciate that the A.O. has erred in treating the genui appreciate that the A.O. has erred in treating the genuine purchases as bogus when the sales of the same have not been purchases as bogus when the sales of the same have not been purchases as bogus when the sales of the same have not been doubted. Thus, the addition of Rs. 1,57,77,971/ doubted. Thus, the addition of Rs. 1,57,77,971/- as alleged bogus purchases is not at all justified and the same may be bogus purchases is not at all justified and the same may be bogus purchases is not at all justified and the same may be deleted. deleted. 3. Briefly stated, facts of the case are that the assessee filed Briefly stated, facts of the case are that the assessee filed Briefly stated, facts of the case are that the assessee filed its return of income for the year under consideration on 27.10.2007 return of income for the year under consideration on 27.10.2007 return of income for the year under consideration on 27.10.2007 declaring Nil income. The return of income was processed u/s declaring Nil income. The return of income was processed u/s declaring Nil income. The return of income was processed u/s 143(1) 143(1) of the Income of the Income-tax tax Act, 1961 (in short ‘the Act’). Act, 1961 (in short ‘the Act’). Subsequently, in view of the information received from the in view of the information received from the in view of the information received from the Investigation Wing that the assessee obtained accommodation ion Wing that the assessee obtained accommodation ion Wing that the assessee obtained accommodation entries of purchase from the concerns controlled by Shri Rajendra entries of purchase from the concerns controlled by Shri Rajendra entries of purchase from the concerns controlled by Shri Rajendra Jain and his group, which he admitted during the course of the Jain and his group, which he admitted during the course of the Jain and his group, which he admitted during the course of the search carried out by the investigation wing on 03.10.2013 at his search carried out by the investigation wing on 03.10.2013 at his search carried out by the investigation wing on 03.10.2013 at his premises, the assessment was reopened u/s 147 of the Act a assessment was reopened u/s 147 of the Act a assessment was reopened u/s 147 of the Act after recording reasons to believe recording reasons to believe that income escaped assessment that income escaped assessment. In the reasons recorded the Assessing Officer noted that assessee the reasons recorded the Assessing Officer noted that assessee the reasons recorded the Assessing Officer noted that assessee obtained accommodation entry of bogus purchase amounting to obtained accommodation entry of bogus purchase amounting to obtained accommodation entry of bogus purchase amounting to Rs.157,77,971/- through M/s hrough M/s ‘Moulimani Impex Pvt. Ltd Moulimani Impex Pvt. Ltd’. and M/s ‘Sun Diam’ which were which were part of group concerns of Shri Rajendra Jain group concerns of Shri Rajendra Jain Group. In the reassessment order dated 23.03.2015 passed u/s Group. In the reassessment order dated 23.03.2015 passed u/s Group. In the reassessment order dated 23.03.2015 passed u/s 147 of the Act, the Assessing Officer disallowed the entire , the Assessing Officer disallowed the entire , the Assessing Officer disallowed the entire purchases of Rs.1,57, 57,77,971/- holding the same to be unexplained holding the same to be unexplained expenditure u/s 69C of the Act. On further appeal, the Ld. CIT(A) expenditure u/s 69C of the Act. On further appeal, the Ld. CIT(A) expenditure u/s 69C of the Act. On further appeal, the Ld. CIT(A)
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upheld the addition relying on the decision of the Hon’ble Supreme upheld the addition relying on the decision of the Hon’ble Supreme upheld the addition relying on the decision of the Hon’ble Supreme Court in the case of N.K. Proteins Ltd. v. DCIT (2017) 292 CTR N.K. Proteins Ltd. v. DCIT (2017) 292 CTR Court in the case of 354 (SC). Aggrieved the assessee is in appeal before the Tribunal ved the assessee is in appeal before the Tribunal ved the assessee is in appeal before the Tribunal raising the grounds as reproduced above. raising the grounds as reproduced above.
Before us, the assessee has filed a Paper Book containing Before us, the assessee has filed a Paper Book containing Before us, the assessee has filed a Paper Book containing pages 1 to 110.
Regarding the ground No Regarding the ground Nos. 1 and 2 of the appeal challenging . 1 and 2 of the appeal challenging validity of the reasses validity of the reassessment, the Ld. Counsel of the assessee sment, the Ld. Counsel of the assessee submitted that assessee wa submitted that assessee was not interested in pursuing tho s not interested in pursuing those grounds and accordingly same are dismissed as not pressed by the grounds and accordingly same are dismissed as not pressed by the grounds and accordingly same are dismissed as not pressed by the assessee.
The ground No The ground Nos. 3 to 6 of the appeal relates to . 3 to 6 of the appeal relates to addition of Rs.1,57,77,971/- made by the Assessing Officer as unexplained ade by the Assessing Officer as unexplained ade by the Assessing Officer as unexplained expenditure u/s 69C of the Act. It was submitted by the assessee expenditure u/s 69C of the Act. It was submitted by the assessee expenditure u/s 69C of the Act. It was submitted by the assessee before the Ld. CIT(A) that assessee was in the business of cut and before the Ld. CIT(A) that assessee was in the business of cut and before the Ld. CIT(A) that assessee was in the business of cut and polished diamond for last many years. It purchased rough diamond polished diamond for last many years. It purchased rough diamond polished diamond for last many years. It purchased rough diamond and processed it into cut and polished diamond in relevant previous t into cut and polished diamond in relevant previous t into cut and polished diamond in relevant previous year. The assessee’s total sales turnover was of Rs.1,66,42,088/ total sales turnover was of Rs.1,66,42,088/- which was wholly export turnover. It was submitted that the which was wholly export turnover. It was submitted that the which was wholly export turnover. It was submitted that the assessee made purchase made purchase of Rs.1,57,77,971/- from two parties from two parties , which consist of Rs.1,40,45,449/ f Rs.1,40,45,449/- from M/s Sun Diam and from M/s Sun Diam and Rs.17,32,522/- from M/s Moulimani Export Pvt. Ltd. The assessee from M/s Moulimani Export Pvt. Ltd. The assessee from M/s Moulimani Export Pvt. Ltd. The assessee submitted that cut and polished diamonds purchased are directly submitted that cut and polished diamonds purchased are directly submitted that cut and polished diamonds purchased are directly
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exported and thus purchase and sales are having direct nexus. exported and thus purchase and sales are having direct nexus. exported and thus purchase and sales are having direct nexus. Whereas Whereas rough rough diamonds diamonds purchased pu were were sent sent to to manufacture/process manufacture/process into cut and polished diamonds and resultant o cut and polished diamonds and resultant cut and polished diamonds cut and polished diamonds were then further exported. Before the then further exported. Before the Ld. CIT(A), the assessee provided one to one co Ld. CIT(A), the assessee provided one to one co- -relation of the purchase and sales of cut and polished di purchase and sales of cut and polished diamonds as well as amonds as well as processed cut and polished diamonds. The assessee further processed cut and polished diamonds. The assessee further processed cut and polished diamonds. The assessee further submitted that if the purchase bills from the said parties was held submitted that if the purchase bills from the said parties was held submitted that if the purchase bills from the said parties was held to be bogus, then no 100% disallowance of the purchase could be no 100% disallowance of the purchase could be no 100% disallowance of the purchase could be made of the assessee as the sales have not been disputed being made of the assessee as the sales have not been made of the assessee as the sales have not been export sales and thus purchases are not denied export sales and thus purchases are not denied. He He submitted that at maximum a certain percentage of a certain percentage of profit could be added on the profit could be added on the presumption that assessee must have purchases those goods from presumption that assessee must have purchases those goods from presumption that assessee must have purchases those goods from grey market. In support of contention, the grey market. In support of contention, the assessee relied on assessee relied on various decisions including Pr. CIT v. Haji Adam in ITA No. 1004 Pr. CIT v. Haji Adam in ITA No. 1004 various decisions including of 2016, Bombay High Court. of 2016, Bombay High Court. However, the Ld. CIT(A) upheld the However, the Ld. CIT(A) upheld the disallowance observing as under: disallowance observing as under:
“8. Decision on Ground No. 2: “8. Decision on Ground No. 2: The appellant in his submission during this ap The appellant in his submission during this appellate proceeding has pellate proceeding has stated that the AO had merely proceeded in the assessment order stated that the AO had merely proceeded in the assessment order stated that the AO had merely proceeded in the assessment order even after details/documents were furnished by him during the even after details/documents were furnished by him during the even after details/documents were furnished by him during the assessment proceedings and apart from the statement given by Shri assessment proceedings and apart from the statement given by Shri assessment proceedings and apart from the statement given by Shri Rajendra Rajendra Jain Jain during during the the course course of of search search no no other other evidence/documents were available with the AO to prove that the evidence/documents were available with the AO to prove that the evidence/documents were available with the AO to prove that the appellant was one of the beneficiaries of the accommodation entry. appellant was one of the beneficiaries of the accommodation entry. appellant was one of the beneficiaries of the accommodation entry. I have carefully perused the facts of the case, submission of the I have carefully perused the facts of the case, submission of the I have carefully perused the facts of the case, submission of the appellant and the order of the Assessing Officer. appellant and the order of the Assessing Officer. It is seen from the It is seen from the submission of the appellant that the appellant has not denied his submission of the appellant that the appellant has not denied his submission of the appellant that the appellant has not denied his transactions with M/s Moulimani Impex Pvt Ltd and M/s. Sun Diam, transactions with M/s Moulimani Impex Pvt Ltd and M/s. Sun Diam, transactions with M/s Moulimani Impex Pvt Ltd and M/s. Sun Diam,
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It was observed during the course of the search on Shri Rajendra It was observed during the course of the search on Shri Rajendra It was observed during the course of the search on Shri Rajendra Jain group that M/s Moulimani Impex Pvt Jain group that M/s Moulimani Impex Pvt Ltd and M/s. Sun Diam, Ltd and M/s. Sun Diam, were the entities controlled and operated by Shri Rajendra Jain were the entities controlled and operated by Shri Rajendra Jain were the entities controlled and operated by Shri Rajendra Jain group. Further, it was also found during the search that no stock group. Further, it was also found during the search that no stock group. Further, it was also found during the search that no stock was maintained/found. Shri Rajendra Jain had admitted on oath was maintained/found. Shri Rajendra Jain had admitted on oath was maintained/found. Shri Rajendra Jain had admitted on oath that that no no actual actual business business was was conducted conducted through th rough the the entities/companies controlled and operated from his premises and entities/companies controlled and operated from his premises and entities/companies controlled and operated from his premises and the entities which were found in his premises were only paper the entities which were found in his premises were only paper the entities which were found in his premises were only paper companies. It was during the course of the search that Shri Rajendra Jain in his It was during the course of the search that Shri Rajendra Jain in his It was during the course of the search that Shri Rajendra Jain in his statement admitted that M/s Moulimani statement admitted that M/s Moulimani Impex Pt Ltd and M/s. Sun Impex Pt Ltd and M/s. Sun Diam, with whom the appellant had traded were such companies Diam, with whom the appellant had traded were such companies Diam, with whom the appellant had traded were such companies which were controlled and operated by him. which were controlled and operated by him. Further, it is seen from the facts of the case that the Assessing Further, it is seen from the facts of the case that the Assessing Further, it is seen from the facts of the case that the Assessing Officer and the DDIT had not reached the conclusion that the Officer and the DDIT had not reached the conclusion that the Officer and the DDIT had not reached the conclusion that the affairs of the appellant company was providing of accommodation entries, of the appellant company was providing of accommodation entries, of the appellant company was providing of accommodation entries, only on the basis of the statement given by Shri Rajendra Jain but it only on the basis of the statement given by Shri Rajendra Jain but it only on the basis of the statement given by Shri Rajendra Jain but it was also on the fact that Shri Rajendra Jain had failed to prove the was also on the fact that Shri Rajendra Jain had failed to prove the was also on the fact that Shri Rajendra Jain had failed to prove the genuineness genuineness of of his his business business before before the the DDIT DDIT and and the the materials/details submitted by the appellant during the course of the materials/details submitted by the appellant during the course of the materials/details submitted by the appellant during the course of the assessment assessment assessment proceeding proceeding proceeding were were were not not not sufficient sufficient sufficient to to to prove prove prove the the the creditworthiness of M/s Moulimani Impex Pt Ltd and M/S. Sun Diam, creditworthiness of M/s Moulimani Impex Pt Ltd and M/S. Sun Diam, creditworthiness of M/s Moulimani Impex Pt Ltd and M/S. Sun Diam, or the genuineness of the transaction. or the genuineness of the transaction. Once, it was prov Once, it was proved beyond doubt that M/s Moulimani Impex Pvt Ltd ed beyond doubt that M/s Moulimani Impex Pvt Ltd and M/s. Sun Diam, were paper companies controlled and operated and M/s. Sun Diam, were paper companies controlled and operated and M/s. Sun Diam, were paper companies controlled and operated by Shri Rajendra Jain who was in the business of providing by Shri Rajendra Jain who was in the business of providing by Shri Rajendra Jain who was in the business of providing accommodation entries then the ledger and the confirmation received accommodation entries then the ledger and the confirmation received accommodation entries then the ledger and the confirmation received from such credit from such credit less persons do not carry any evidentiary value. less persons do not carry any evidentiary value. Apart from the above, the appellant has raised the argument during Apart from the above, the appellant has raised the argument during Apart from the above, the appellant has raised the argument during the assessment proceeding that the payments were made through the assessment proceeding that the payments were made through the assessment proceeding that the payments were made through banking channel. However, in my banking channel. However, in my -considered view this does not suo moto estab considered view this does not suo moto establish the genuineness of lish the genuineness of the transaction or creditworthiness of the purchase parties. the transaction or creditworthiness of the purchase parties. In this regard, it would be proper to bring out relevant legal position In this regard, it would be proper to bring out relevant legal position In this regard, it would be proper to bring out relevant legal position on these issues pertaining to the case of the appellant that merely on these issues pertaining to the case of the appellant that merely on these issues pertaining to the case of the appellant that merely because the funds have moved th because the funds have moved through banking channel and the rough banking channel and the entities concerned have arranged the paperwork, the transaction entities concerned have arranged the paperwork, the transaction entities concerned have arranged the paperwork, the transaction cannot be held as genuine. The matter needs to be viewed in its cannot be held as genuine. The matter needs to be viewed in its cannot be held as genuine. The matter needs to be viewed in its entirety that too after taking into account various facts enlisted entirety that too after taking into account various facts enlisted entirety that too after taking into account various facts enlisted above. Reference in this regard Reference in this regard is invited to the decision of the Hon'ble ITAT is invited to the decision of the Hon'ble ITAT Delhi Bench in the case of DCIT Vs. Smt. Phoolwati Devi (2009) 314 Delhi Bench in the case of DCIT Vs. Smt. Phoolwati Devi (2009) 314 Delhi Bench in the case of DCIT Vs. Smt. Phoolwati Devi (2009) 314 ITAT (Delhi), wherein it is held as under: ITAT (Delhi), wherein it is held as under:-
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"Despite the documentation supporting the claim of the "Despite the documentation supporting the claim of the "Despite the documentation supporting the claim of the assessee superficially, the evidence could assessee superficially, the evidence could not be accepted in not be accepted in view view view of of of the the the surrounding surrounding surrounding circumstances circumstances circumstances and and and human human human probabilities that there were certain features of the case probabilities that there were certain features of the case probabilities that there were certain features of the case which believe the documentary evidence. which believe the documentary evidence. Further, it was settled in the case of CIT vs. Durga Prasad More 82 Further, it was settled in the case of CIT vs. Durga Prasad More 82 Further, it was settled in the case of CIT vs. Durga Prasad More 82 IT 540 (SC) that wher IT 540 (SC) that where a party relies on self-serving recitals in a serving recitals in a document, it is for that party to establish the truth of these recitals. document, it is for that party to establish the truth of these recitals. document, it is for that party to establish the truth of these recitals. It was further held by the Apex Court in this case that the tax It was further held by the Apex Court in this case that the tax It was further held by the Apex Court in this case that the tax authorities are entitled to look into the surrounding circumstances to authorities are entitled to look into the surrounding circumstances to authorities are entitled to look into the surrounding circumstances to find out the reality of such recitals. ind out the reality of such recitals. In the case of M/s Kachwala Gems V/ JCIT ITA No 134/JP/2002 In the case of M/s Kachwala Gems V/ JCIT ITA No 134/JP/2002 In the case of M/s Kachwala Gems V/ JCIT ITA No 134/JP/2002 dated 10/12/2003, which has been affirmed by the Supreme Court dated 10/12/2003, which has been affirmed by the Supreme Court dated 10/12/2003, which has been affirmed by the Supreme Court in in in the the the case case case of of of M/.Kachwala M/.Kachwala M/.Kachwala Gems Gems Gems V/s V/s V/s JCIT JCIT JCIT (2006) (2006) (2006) 20 20 20 6CTR(SC)585,288 IT 10(SC), it was held that payment by account SC)585,288 IT 10(SC), it was held that payment by account SC)585,288 IT 10(SC), it was held that payment by account payee cheque is not sufficient to establish the genuineness of payee cheque is not sufficient to establish the genuineness of payee cheque is not sufficient to establish the genuineness of purchases. Further, in the case of CIT Vs Prashant (P)(1994) 121 CTR (Cal) 20, Further, in the case of CIT Vs Prashant (P)(1994) 121 CTR (Cal) 20, Further, in the case of CIT Vs Prashant (P)(1994) 121 CTR (Cal) 20, the Calcutta High Court has held that even payment by ac the Calcutta High Court has held that even payment by ac the Calcutta High Court has held that even payment by account payee cheque is not sacrosanct and it would not make an otherwise payee cheque is not sacrosanct and it would not make an otherwise payee cheque is not sacrosanct and it would not make an otherwise non-genuine transaction genuine. genuine transaction genuine. Further, the contention of the appellant that they were not provided Further, the contention of the appellant that they were not provided Further, the contention of the appellant that they were not provided with the opportunity to cross examination of the third party whose with the opportunity to cross examination of the third party whose with the opportunity to cross examination of the third party whose statement was r statement was relied by the Assessing Officer is also not acceptable. elied by the Assessing Officer is also not acceptable. As stated above the DDIT and the AO had reached to the conclusion As stated above the DDIT and the AO had reached to the conclusion As stated above the DDIT and the AO had reached to the conclusion that the transactions entered by the appellant with M/s Moulimani that the transactions entered by the appellant with M/s Moulimani that the transactions entered by the appellant with M/s Moulimani Impex Pt Ltd and M/s. Impex Pt Ltd and M/s. Sun Diam, controlled and operated by Shri Sun Diam, controlled and operated by Shri Rajendra Jain were bogus, not only on the statement of Shri dra Jain were bogus, not only on the statement of Shri dra Jain were bogus, not only on the statement of Shri Rajendra Jain and the persons whose statements were recorded by Rajendra Jain and the persons whose statements were recorded by Rajendra Jain and the persons whose statements were recorded by the DDIT, but it was also on the basis/findings during the the DDIT, but it was also on the basis/findings during the the DDIT, but it was also on the basis/findings during the search/post search and the assessment proceedings by the A search/post search and the assessment proceedings by the A search/post search and the assessment proceedings by the A wherein he came to wherein he came to the conclusion that the transactions entered by the conclusion that the transactions entered by the appellant M/s Moulimani Impex Pvt Ltd and M/s. Sun Diam, the appellant M/s Moulimani Impex Pvt Ltd and M/s. Sun Diam, the appellant M/s Moulimani Impex Pvt Ltd and M/s. Sun Diam, were controlled and operated by Shri Rajendra Jain were bogus. The were controlled and operated by Shri Rajendra Jain were bogus. The were controlled and operated by Shri Rajendra Jain were bogus. The appellant has failed to furnish/explain/prove the creditworthiness of appellant has failed to furnish/explain/prove the creditworthiness of appellant has failed to furnish/explain/prove the creditworthiness of the M/s Moulimani Impex Pvt Ltd and M/s. Sun Diam, with whom he ulimani Impex Pvt Ltd and M/s. Sun Diam, with whom he ulimani Impex Pvt Ltd and M/s. Sun Diam, with whom he had transacted. had transacted. This further, proves that the finding of the search/post search This further, proves that the finding of the search/post search This further, proves that the finding of the search/post search proceedings and the observation of the Assessing Officer during the proceedings and the observation of the Assessing Officer during the proceedings and the observation of the Assessing Officer during the assessment proceedings had direct connection with the assessment proceedings had direct connection with the statement statement given by Shri Rajendra Jain that no real business was conducted in given by Shri Rajendra Jain that no real business was conducted in given by Shri Rajendra Jain that no real business was conducted in any of the firms/companies /entities which were operated from his any of the firms/companies /entities which were operated from his any of the firms/companies /entities which were operated from his premises
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In this regard, it would be pertinent to state that the Apex Court in In this regard, it would be pertinent to state that the Apex Court in In this regard, it would be pertinent to state that the Apex Court in the case of M/s. the case of M/s. Nath International sales vs, Union of India AIR 1992 l sales vs, Union of India AIR 1992 (Del) 295) has stated that "The right of cross examination is not an (Del) 295) has stated that "The right of cross examination is not an (Del) 295) has stated that "The right of cross examination is not an absolute right". The Hon'ble Supreme Court has also held that the absolute right". The Hon'ble Supreme Court has also held that the absolute right". The Hon'ble Supreme Court has also held that the right of hearing does not necessarily include right of cross right of hearing does not necessarily include right of cross right of hearing does not necessarily include right of cross examination. The right o examination. The right of cross examination must depend upon the f cross examination must depend upon the circumstances of each case and also on the statute concerned (State circumstances of each case and also on the statute concerned (State circumstances of each case and also on the statute concerned (State of I&K vs. Bakshi Gulam Mohammad AIR 1967 SC 122). of I&K vs. Bakshi Gulam Mohammad AIR 1967 SC 122). The question whether the assessee is entitled to cross examination is The question whether the assessee is entitled to cross examination is The question whether the assessee is entitled to cross examination is a question which may large a question which may largely depends on the facts and ly depends on the facts and circumstances of the case (ef. Shyamlal Biri Merchant vs circumstances of the case (ef. Shyamlal Biri Merchant vs. UOI (1993) . UOI (1993) 68 ELT 548, 551(All 68 ELT 548, 551(All.) In the present case no such circumstances are warranted as in the In the present case no such circumstances are warranted as in the In the present case no such circumstances are warranted as in the list of beneficiaries to whom accommodation entries were provided list of beneficiaries to whom accommodation entries were provided list of beneficiaries to whom accommodation entries were provided by the said group categorically contains the name and address of the by the said group categorically contains the name and address of the by the said group categorically contains the name and address of the relevant concerns. Further the group has categorically relevant concerns. Further the group has categorically admitted to admitted to have provided accommodation entries of unsecured loans through have provided accommodation entries of unsecured loans through have provided accommodation entries of unsecured loans through various benami concerns. various benami concerns. The Hon'ble Rajasthan High Court in the case of Rameshwarlal Mali The Hon'ble Rajasthan High Court in the case of Rameshwarlal Mali The Hon'ble Rajasthan High Court in the case of Rameshwarlal Mali vs. CIT 256 ITR 536(Raj.) has held that "there is no provision for vs. CIT 256 ITR 536(Raj.) has held that "there is no provision for vs. CIT 256 ITR 536(Raj.) has held that "there is no provision for permitting the cross ex permitting the cross examination of the persons whose statements amination of the persons whose statements were recorded during survey." were recorded during survey." In CIT v. Metal Products of India (1984) 150 IT 714 (P&), it was held In CIT v. Metal Products of India (1984) 150 IT 714 (P&), it was held In CIT v. Metal Products of India (1984) 150 IT 714 (P&), it was held that the AO may gather information in any manner he likes, behind that the AO may gather information in any manner he likes, behind that the AO may gather information in any manner he likes, behind the back of the assessee and utilize the same ag the back of the assessee and utilize the same against the assessee, ainst the assessee, even if it does not, in all respects satisfy the requirements of the even if it does not, in all respects satisfy the requirements of the even if it does not, in all respects satisfy the requirements of the Indian Evidence Act. What is necessary is that he should have Indian Evidence Act. What is necessary is that he should have Indian Evidence Act. What is necessary is that he should have material upon which to base the assessment; "material" as material upon which to base the assessment; "material" as material upon which to base the assessment; "material" as distinguished distinguished from from "evidence" which includes direct rect and and circumstantial evidence. circumstantial evidence. In the case of Khujji @ Surendra Tiwari versus The State of Madhya In the case of Khujji @ Surendra Tiwari versus The State of Madhya In the case of Khujji @ Surendra Tiwari versus The State of Madhya Pradesh (Order dated 167.1991) 1991 AIR 1853, the Supreme Court Pradesh (Order dated 167.1991) 1991 AIR 1853, the Supreme Court Pradesh (Order dated 167.1991) 1991 AIR 1853, the Supreme Court held... The evidence of such witness held... The evidence of such witness-es cannot be treated as effaced es cannot be treated as effaced or washed off the reco or washed off the record altogether but the same can be accepted to rd altogether but the same can be accepted to the extent their version is found to be dependable on a careful the extent their version is found to be dependable on a careful the extent their version is found to be dependable on a careful scrutiny thereof." scrutiny thereof." Therefore, after considering all the above facts, and the ratio laid Therefore, after considering all the above facts, and the ratio laid Therefore, after considering all the above facts, and the ratio laid down by the Hon'ble Supreme Court in the case of NK Protei down by the Hon'ble Supreme Court in the case of NK Protei down by the Hon'ble Supreme Court in the case of NK Proteins Ltd vS DCIT (2017) 292 CTR 354 (SC), I am of the considered view that the DCIT (2017) 292 CTR 354 (SC), I am of the considered view that the DCIT (2017) 292 CTR 354 (SC), I am of the considered view that the Assessing Officer is right in making addition towards 100% of bogus Assessing Officer is right in making addition towards 100% of bogus Assessing Officer is right in making addition towards 100% of bogus purchases from the M/s Moulimani Impex Pvt Ltd and M/s. Sun purchases from the M/s Moulimani Impex Pvt Ltd and M/s. Sun purchases from the M/s Moulimani Impex Pvt Ltd and M/s. Sun Diam, which were controlled and operated by Shri Ra Diam, which were controlled and operated by Shri Rajendra Jain. jendra Jain. The entire addition made by the Assessing Officer is upheld. Hence, The entire addition made by the Assessing Officer is upheld. Hence, The entire addition made by the Assessing Officer is upheld. Hence, the ground of appeal is dismissed. the ground of appeal is dismissed.”
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5.1 Before us, the Ld. Counsel of the assessee submitted that Before us, the Ld. Counsel of the assessee submitted that Before us, the Ld. Counsel of the assessee submitted that identical issue of bogus purchases from identical issue of bogus purchases from ‘Rajendra Jain Group Rajendra Jain Group’ was raised in assessment year 2008 ssessment year 2008-09 by the Assessing Officer and 09 by the Assessing Officer and . On further appeal, the Tribunal made addition of Rs.13,00,556/ made addition of Rs.13,00,556/-. On further appeal in ITA No. 1617/Mum/2023 for assessment year 2008-09 in ITA No. 1617/Mum/2023 for assessment year 2008 in ITA No. 1617/Mum/2023 for assessment year 2008 upheld the addition of 4% the addition of 4% of the bogus purchases. He accordingly of the bogus purchases. He accordingly submitted that disall submitted that disallowance in the year under consideration should owance in the year under consideration should also be restricted to 4% of the bogus purchases. be restricted to 4% of the bogus purchases.
5.2 We have heard rival submission of the parties on the issue in We have heard rival submission of the parties on the issue in We have heard rival submission of the parties on the issue in dispute and perused the relevant material on record. We find that dispute and perused the relevant material on record. We find that dispute and perused the relevant material on record. We find that in the year under considerat in the year under consideration, the Assessing Officer has ion, the Assessing Officer has disallowed the entire purchases amounting to Rs.157,77,791/- disallowed the entire purchases amounting to Rs.157,77,791/ disallowed the entire purchases amounting to Rs.157,77,791/ from M/s Moulimani Impex Pvt. Ltd. and M/s Sun Diam, the from M/s Moulimani Impex Pvt. Ltd. and M/s Sun Diam, the from M/s Moulimani Impex Pvt. Ltd. and M/s Sun Diam, the concern which were controlled by Shri Rajendra Jain Group. The concern which were controlled by Shri Rajendra Jain Group. The concern which were controlled by Shri Rajendra Jain Group. The contention of the assessee before us, that d contention of the assessee before us, that disallowance in respect of isallowance in respect of bogus purchases should be restricted to the 4% of the quantum of bogus purchases should be restricted to the 4% of the quantum of bogus purchases should be restricted to the 4% of the quantum of bogus purchases as held by the Tribunal in the case of the assessee bogus purchases as held by the Tribunal in the case of the assessee bogus purchases as held by the Tribunal in the case of the assessee for assessment year 2008 for assessment year 2008-09. The relevant finding of the Tribunal is 09. The relevant finding of the Tribunal is reproduced as under: reproduced as under:
“6. The ground No.3 to 6 of appeal are in respect of single issue i.e. ground No.3 to 6 of appeal are in respect of single issue i.e. ground No.3 to 6 of appeal are in respect of single issue i.e. addition of Rs. 13,00,556/ addition of Rs. 13,00,556/- made on account of bogus purchases. The made on account of bogus purchases. The addition has been made in the hands of assessee for obtaining addition has been made in the hands of assessee for obtaining addition has been made in the hands of assessee for obtaining accommodation entries to the tune of Rs. 13,00,556/ accommodation entries to the tune of Rs. 13,00,556/- from M/s. from M/s. Sparsh Exports Pvt. Ltd., a group concern of Rajendra Jain. Undisputedly, the Exports Pvt. Ltd., a group concern of Rajendra Jain. Undisputedly, the Exports Pvt. Ltd., a group concern of Rajendra Jain. Undisputedly, the assessee failed to discharge its onus in proving genuineness of assessee failed to discharge its onus in proving genuineness of assessee failed to discharge its onus in proving genuineness of purchases made from said company. Thus, the Assessing Officer made purchases made from said company. Thus, the Assessing Officer made purchases made from said company. Thus, the Assessing Officer made addition of the entire such purchases. It is e addition of the entire such purchases. It is equally true that the qually true that the Assessing Officer accepted sales declared by the assessee . No Assessing Officer accepted sales declared by the assessee . No Assessing Officer accepted sales declared by the assessee . No discrepancy was pointed by the Assessing Officer with respect to the discrepancy was pointed by the Assessing Officer with respect to the discrepancy was pointed by the Assessing Officer with respect to the
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inventory. Thus, without purchases there cannot be sales. The inventory. Thus, without purchases there cannot be sales. The inventory. Thus, without purchases there cannot be sales. The possibility of assessee procuring diamond possibility of assessee procuring diamonds from grey market cannot be s from grey market cannot be ruled out. The Hon'ble Bombay High Court in the case of PCIT vs. ruled out. The Hon'ble Bombay High Court in the case of PCIT vs. ruled out. The Hon'ble Bombay High Court in the case of PCIT vs. Paramshakhti Distributors Pvt. Ltd. in Income Tax Appeal No.413 of Paramshakhti Distributors Pvt. Ltd. in Income Tax Appeal No.413 of Paramshakhti Distributors Pvt. Ltd. in Income Tax Appeal No.413 of 2017 decided on 15/07/2019 has held that in such like transactions 2017 decided on 15/07/2019 has held that in such like transactions 2017 decided on 15/07/2019 has held that in such like transactions entire purchases cannot be a entire purchases cannot be added. It is only the profit embedded in dded. It is only the profit embedded in purchases covered by bogus bills that can be added. Taking into purchases covered by bogus bills that can be added. Taking into purchases covered by bogus bills that can be added. Taking into consideration entire facts, the suppressed profit on bogus purchases is consideration entire facts, the suppressed profit on bogus purchases is consideration entire facts, the suppressed profit on bogus purchases is estimated at 4%. The Assessing Officer is directed to restrict addition on estimated at 4%. The Assessing Officer is directed to restrict addition on estimated at 4%. The Assessing Officer is directed to restrict addition on bogus purchases, accordingly. Consequently, ground No.3 to 6 of purchases, accordingly. Consequently, ground No.3 to 6 of purchases, accordingly. Consequently, ground No.3 to 6 of appeal are partly allowed. appeal are partly allowed.” 5.3 We find that in the assessment year 2008 We find that in the assessment year 2008-09 also the addition 09 also the addition made in the case of the assessee made in the case of the assessee for obtaining accommodation obtaining accommodation entries of Rs.13,00,556/ entries of Rs.13,00,556/- from M/s Sparsh Export Pvt. Ltd. Export Pvt. Ltd. i.e. a group concern of Shri Rajendra Jain. The issue in dispute involved group concern of Shri Rajendra Jain. The issue in dispute involved group concern of Shri Rajendra Jain. The issue in dispute involved in the year under consideration is identical and therefore, following in the year under consideration is identical and therefore, following in the year under consideration is identical and therefore, following the finding of the Tribunal the finding of the Tribunal (supra), the addition to the extent of 4% , the addition to the extent of 4% of the bogus purchases is sustained. The grounds of appeal of the of the bogus purchases is sustained. The grounds of appeal of the of the bogus purchases is sustained. The grounds of appeal of the assessee are accordingly partly allowed. assessee are accordingly partly allowed.
Now, we take up the appeal of the assessee for assessment we take up the appeal of the assessee for assessment we take up the appeal of the assessee for assessment year 2018-19. The grounds raised by the assessee are 19. The grounds raised by the assessee are 19. The grounds raised by the assessee are reproduced as under:
The Ld. Commissioner of Income Tax (Appeals) erred in passing The Ld. Commissioner of Income Tax (Appeals) erred in passing The Ld. Commissioner of Income Tax (Appeals) erred in passing the order dated 05.04.2023 without providing the Appellant an the order dated 05.04.2023 without providing the Appellant an the order dated 05.04.2023 without providing the Appellant an appropriate opportunity to make submissions and attend the appropriate opportunity to make submissions and attend the appropriate opportunity to make submissions and attend the hearing. Thus, order dated 05.04.2023 has been pass hearing. Thus, order dated 05.04.2023 has been pass hearing. Thus, order dated 05.04.2023 has been passed in breach of principles of natural justice. Hence, the same is bad breach of principles of natural justice. Hence, the same is bad breach of principles of natural justice. Hence, the same is bad-in- law and may be set law and may be set-a-side. 2. 2. The Ld. CIT(A) erred in confirming the action of the A.O. of 2. The Ld. CIT(A) erred in confirming the action of the A.O. of 2. The Ld. CIT(A) erred in confirming the action of the A.O. of making addition of Rs.4,02,01,020/ making addition of Rs.4,02,01,020/- under section 69C of the under section 69C of the Income tax Act, 1961 (the Act) Income tax Act, 1961 (the Act) without appreciating the facts and without appreciating the facts and circumstances of the case. Thus, the addition of Rs.4,02,01,020/ circumstances of the case. Thus, the addition of Rs.4,02,01,020/ circumstances of the case. Thus, the addition of Rs.4,02,01,020/- under section 69C of the Act and levy of tax as per the provisions under section 69C of the Act and levy of tax as per the provisions under section 69C of the Act and levy of tax as per the provisions of section 115BBE of the Act is not at all justified and the same of section 115BBE of the Act is not at all justified and the same of section 115BBE of the Act is not at all justified and the same may be deleted. may be deleted. 3. 3. The Ld. CIT(A) failed to appreciate during the course of the Ld. CIT(A) failed to appreciate during the course of the survey under section 133A of the Act no discrepancy was found survey under section 133A of the Act no discrepancy was found survey under section 133A of the Act no discrepancy was found
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in the physical quantity of stock in the physical quantity of stock-in-trade of the Appellant i.e. the trade of the Appellant i.e. the stock found during the course of survey was duly recorded in the stock found during the course of survey was duly recorded in the stock found during the course of survey was duly recorded in the books of accounts. The value of the stock was also reflected in the oks of accounts. The value of the stock was also reflected in the oks of accounts. The value of the stock was also reflected in the regular books of account as per the consistent method of regular books of account as per the consistent method of regular books of account as per the consistent method of valuation of stock followed by the Appellant. Thus, Rs. valuation of stock followed by the Appellant. Thus, Rs. valuation of stock followed by the Appellant. Thus, Rs. 4,02,01,020/ 4,02,01,020/- is is not not an an unexplained unexplained expenditure. expenditure. Thus, Thus, provisions of section provisions of section 69C are not attracted to the facts of the 69C are not attracted to the facts of the present case. Hence, addition made invoking section 69Cof the present case. Hence, addition made invoking section 69Cof the present case. Hence, addition made invoking section 69Cof the Act and the levy of tax under section 115BBE of the Act is not at Act and the levy of tax under section 115BBE of the Act is not at Act and the levy of tax under section 115BBE of the Act is not at all justified and the same may be deleted. all justified and the same may be deleted. 4. 4. Without prejudice to the above the Ld. 4. Without prejudice to the above the Ld. CIT(A) failed to CIT(A) failed to appreciate that A.O. has erred in treating an amount of appreciate that A.O. has erred in treating an amount of appreciate that A.O. has erred in treating an amount of Rs.4,02,01,020/ Rs.4,02,01,020/- as unexplained expenditure under section 69C as unexplained expenditure under section 69C of the Act without appreciating the fact that during the course of of the Act without appreciating the fact that during the course of of the Act without appreciating the fact that during the course of the survey or investigation thereafter, no evidence wa the survey or investigation thereafter, no evidence wa the survey or investigation thereafter, no evidence was found that the Appellant has paid Rs. 40,919/ the Appellant has paid Rs. 40,919/- per carats to purchase the per carats to purchase the stock of 7277.5 carats of diamonds. Thus, the addition of stock of 7277.5 carats of diamonds. Thus, the addition of stock of 7277.5 carats of diamonds. Thus, the addition of Rs.4,02,01,020/ Rs.4,02,01,020/- under section 69C of the Act is not at all under section 69C of the Act is not at all justified and levy of tax under section 115BBE of the Act is h justified and levy of tax under section 115BBE of the Act is h justified and levy of tax under section 115BBE of the Act is highly arbitrary. Thus, the addition of Rs.4,02,01,020/ arbitrary. Thus, the addition of Rs.4,02,01,020/- may be deleted. may be deleted. 5. Without prejudice to the above, the Ld. CITIA) failed to appreciate Without prejudice to the above, the Ld. CITIA) failed to appreciate Without prejudice to the above, the Ld. CITIA) failed to appreciate that a statement on oath cannot be recorded during the course of that a statement on oath cannot be recorded during the course of that a statement on oath cannot be recorded during the course of survey proceedings and that any forced acceptance d survey proceedings and that any forced acceptance d survey proceedings and that any forced acceptance during the course of survey on the basis of loose papers / diaries without course of survey on the basis of loose papers / diaries without course of survey on the basis of loose papers / diaries without any incriminating evidence, holds no evidentiary value. Thus, the any incriminating evidence, holds no evidentiary value. Thus, the any incriminating evidence, holds no evidentiary value. Thus, the addition made u/s 69C of the Act may please be deleted. addition made u/s 69C of the Act may please be deleted. addition made u/s 69C of the Act may please be deleted. 6.1 Briefly stated facts of the case are that in the case of Briefly stated facts of the case are that in the case of Briefly stated facts of the case are that in the case of survey action u/s 133A of the action u/s 133A of the Act carried out on 16.02.2018. a Act carried out on 16.02.2018. a notebook was found in which two different valuation of the closing stock was was found in which two different valuation of the closing stock was was found in which two different valuation of the closing stock was made. First, valuation valuation was at the rate of Rs.35,395/ Rs.35,395/- per carat, which was claimed to be as per books of accounts and another which was claimed to be as per books of accounts which was claimed to be as per books of accounts valuation was made valuation was made at the rate of Rs. 40,919/- per carat , per carat , which was claimed to be the actual rate per carat was claimed to be the actual rate per carat of diamonds of diamonds. In view of the entries in the notebook the entries in the notebook, the Partner of the assessee firm Partner of the assessee firm Shri Dinesh Kalathiya agreed to offer differenc agreed to offer difference of two valuation of two valuation of Rs.4,02,01,020/- as undisclosed profit for the year under as undisclosed profit for the year under as undisclosed profit for the year under consideration. In the return of income filed for the year under n the return of income filed for the year under n the return of income filed for the year under consideration, while while computing business profit, the assessee taken business profit, the assessee taken
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into consideration, the said disclosure of th into consideration, the said disclosure of the undisclosed profit. But undisclosed profit. But , the Assessing Officer while passing the order u/s 143(3) dated he Assessing Officer while passing the order u/s 143(3) dated he Assessing Officer while passing the order u/s 143(3) dated 21.06.2021, reduced d the said profit from the business income and the said profit from the business income and separately added as unexplained expenditure separately added as unexplained expenditure/investment u/s 69C /investment u/s 69C of the Act and invoked of the Act and invoked provisions of section 115BBE of the Act provisions of section 115BBE of the Act applying tax rate of 60% on said amount of Rs.4,02,01,020/ tax rate of 60% on said amount of Rs.4,02,01,020/-. On tax rate of 60% on said amount of Rs.4,02,01,020/ further appeal, the Ld. CIT(A) upheld the action of the Assessing further appeal, the Ld. CIT(A) upheld the action of the Assessing further appeal, the Ld. CIT(A) upheld the action of the Assessing Officer observing as under: Officer observing as under:
“5. Appellate Decision: “5. Appellate Decision: I have carefully perused the fact I have carefully perused the facts of the case, the grounds of appeal s of the case, the grounds of appeal raised by the appellant and the order of the Assessing Officer. It is seen raised by the appellant and the order of the Assessing Officer. It is seen raised by the appellant and the order of the Assessing Officer. It is seen from the facts of the case that the appellant has not disputed the issue from the facts of the case that the appellant has not disputed the issue from the facts of the case that the appellant has not disputed the issue of valuation and the notings in the fortune note book pertaining to the of valuation and the notings in the fortune note book pertaining to the of valuation and the notings in the fortune note book pertaining to the closing stock found during the course of survey us 133A. It is also a fact closing stock found during the course of survey us 133A. It is also a fact closing stock found during the course of survey us 133A. It is also a fact that the difference of the valuation was offered by the assessee in the that the difference of the valuation was offered by the assessee in the that the difference of the valuation was offered by the assessee in the valuation of closing stock for the twer, Televant assessment year. This valuation of closing stock for the twer, Televant assessment year. This valuation of closing stock for the twer, Televant assessment year. This conduct of the appellant clearly pro conduct of the appellant clearly proves that It had undervalued its ves that It had undervalued its closing stock. Further, it is seen from the submission of the appellant closing stock. Further, it is seen from the submission of the appellant closing stock. Further, it is seen from the submission of the appellant that even though it had offered the difference in the valuation of the that even though it had offered the difference in the valuation of the that even though it had offered the difference in the valuation of the closing stock, the source of the same was not explained by the closing stock, the source of the same was not explained by the closing stock, the source of the same was not explained by the appellant. Further Further, it is also seen that the appellant had not furnished , it is also seen that the appellant had not furnished item wise, carat wise, colour wise, clarity wise breakup of his opening item wise, carat wise, colour wise, clarity wise breakup of his opening item wise, carat wise, colour wise, clarity wise breakup of his opening stock, purchases made during the year, sales made during the year stock, purchases made during the year, sales made during the year stock, purchases made during the year, sales made during the year and the closing stock. The appellant has not furnished purchase and the closing stock. The appellant has not furnished purchase and the closing stock. The appellant has not furnished purchase wise evidences serine report explaining and proving the detail of purchase evidences serine report explaining and proving the detail of purchase evidences serine report explaining and proving the detail of purchase wise valuation. wise valuation. 5.1 Considering the above facts, since the appellant failed to explain the 5.1 Considering the above facts, since the appellant failed to explain the 5.1 Considering the above facts, since the appellant failed to explain the source of purchase in the valuation of closing stock with supporting source of purchase in the valuation of closing stock with supporting source of purchase in the valuation of closing stock with supporting documentary evidence documentary evidences, I am of the considered view that the Assessing s, I am of the considered view that the Assessing Officer has rightly added the sum of Rs. 4,02,01,020/ Officer has rightly added the sum of Rs. 4,02,01,020/ Officer has rightly added the sum of Rs. 4,02,01,020/- being the difference of the valuation of the closing stock w/ 69C of the IT Act. The difference of the valuation of the closing stock w/ 69C of the IT Act. The difference of the valuation of the closing stock w/ 69C of the IT Act. The order of the Assessing Officer is upheld. This ground raised by th order of the Assessing Officer is upheld. This ground raised by th order of the Assessing Officer is upheld. This ground raised by the appellant is dismissed. appellant is dismissed.” 6.2 The Ld. CIT(A) further upheld the application of section The Ld. CIT(A) further upheld the application of section The Ld. CIT(A) further upheld the application of section 115BBE of the Act observing as under: 115BBE of the Act observing as under:
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“7.1 The appellant in this ground has raised the issue that the AO had 7.1 The appellant in this ground has raised the issue that the AO had 7.1 The appellant in this ground has raised the issue that the AO had completed the assessment proceeding by taxing the differenc completed the assessment proceeding by taxing the differenc completed the assessment proceeding by taxing the difference in the valuation of closing stock which was accepted during the course of valuation of closing stock which was accepted during the course of valuation of closing stock which was accepted during the course of survey action to buy peace with the department as unexplained survey action to buy peace with the department as unexplained survey action to buy peace with the department as unexplained expenditure us 69C of the IT Act when the same was already added by expenditure us 69C of the IT Act when the same was already added by expenditure us 69C of the IT Act when the same was already added by the appellant and offered under the head business the appellant and offered under the head business and profession. and profession. 7.2 I have carefully perused the facts of the case, the grounds of appeal 7.2 I have carefully perused the facts of the case, the grounds of appeal 7.2 I have carefully perused the facts of the case, the grounds of appeal raised by the appellant and the order of the Assessing Officer. In the raised by the appellant and the order of the Assessing Officer. In the raised by the appellant and the order of the Assessing Officer. In the case appellant survey us 133A of the Act was conducted during which case appellant survey us 133A of the Act was conducted during which case appellant survey us 133A of the Act was conducted during which certain fortune note books certain fortune note books were found, entries therein were not recorded were found, entries therein were not recorded in the books of accounts. in the books of accounts. Accordingly, the appellant had offered the Accordingly, the appellant had offered the same in the valuation of closing stock as an additional income over and same in the valuation of closing stock as an additional income over and same in the valuation of closing stock as an additional income over and above the normal income of the appellant. above the normal income of the appellant. 7.3 In my considered view, 7.3 In my considered view, the appellant had failed to prove that the the appellant had failed to prove that the amount which was earned, from where the difference in the closing amount which was earned, from where the difference in the closing amount which was earned, from where the difference in the closing stock was detected, was earned during the regular course of business. stock was detected, was earned during the regular course of business. stock was detected, was earned during the regular course of business. The onus was on the appellant to establish the source of the The onus was on the appellant to establish the source of the The onus was on the appellant to establish the source of the surrendered inc surrendered income failing which it needs to be categorized as deemed ome failing which it needs to be categorized as deemed income w/s 69C of the Act, which the appellant failed to do so. income w/s 69C of the Act, which the appellant failed to do so. income w/s 69C of the Act, which the appellant failed to do so. 7.4 As discussed in the above ground it is seen that the appellant 7.4 As discussed in the above ground it is seen that the appellant 7.4 As discussed in the above ground it is seen that the appellant though offered the difference in the valuation of the closing stock, h though offered the difference in the valuation of the closing stock, h though offered the difference in the valuation of the closing stock, had failed to explain the source of purchase in the valuation of closing stock failed to explain the source of purchase in the valuation of closing stock failed to explain the source of purchase in the valuation of closing stock with supporting documentary evidences and such discrepancies attract with supporting documentary evidences and such discrepancies attract with supporting documentary evidences and such discrepancies attract the provision of section 69C of the LIT. Act for computing the income the provision of section 69C of the LIT. Act for computing the income the provision of section 69C of the LIT. Act for computing the income u/s.115BBE of the IT Act. The ground ra u/s.115BBE of the IT Act. The ground raised by the appellant is ised by the appellant is accordingly, dismissed. accordingly, dismissed.” 6.3 Before us, the Ld. Counsel of the assessee submitted that Before us, the Ld. Counsel of the assessee submitted that Before us, the Ld. Counsel of the assessee submitted that during the course of survey no during the course of survey no difference in the quantity of the difference in the quantity of the stock was found and and difference was only on account of valuation as difference was only on account of valuation as per the books of accounts and s of accounts and valuation of stock as on the date of as on the date of the survey. According to him the survey. According to him, there was no unexplained there was no unexplained expenditure noticed by the Assessing Officer therefore, invoking of expenditure noticed by the Assessing Officer therefore, invoking of expenditure noticed by the Assessing Officer therefore, invoking of section 115BBE is not justified. The Ld. Counsel of the assessee section 115BBE is not justified. The Ld. Counsel of the ass section 115BBE is not justified. The Ld. Counsel of the ass relied on the decision in the case of Shainrup Sampatram v. CIT Shainrup Sampatram v. CIT relied on the decision in the case of [1953] 24 ITR 481 (SC) [1953] 24 ITR 481 (SC) and in the case of Stone Age (P.) Ltd. v. Stone Age (P.) Ltd. v. DCIT [2020] 116 taxmann.com 930 (Jaipur DCIT [2020] 116 taxmann.com 930 (Jaipur-Trib.). .
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6.3.1 The Ld. Counsel of the assessee also referred to page 107 The Ld. Counsel of the assessee also referred to page 107 The Ld. Counsel of the assessee also referred to page 107 of the Paper Book, which is working of the closing stock for the which is working of the closing stock for the which is working of the closing stock for the purpose of profit and loss account including the undisclosed profit. pose of profit and loss account including the undisclosed profit. pose of profit and loss account including the undisclosed profit.
6.4 We have heard rival submission and perused the relevant We have heard rival submission and perused the relevant We have heard rival submission and perused the relevant material on record. It is undisputed that no difference in quantity of material on record. It is undisputed that no difference in quantity of material on record. It is undisputed that no difference in quantity of the stock was found during the course of the survey. The Assessing he stock was found during the course of the survey. The Assessing he stock was found during the course of the survey. The Assessing Officer has referred only difference in Officer has referred only difference in valuation of stock. It is not of stock. It is not the case of the Assessing Officer that any of the purchases were not the case of the Assessing Officer that any of the purchases were not the case of the Assessing Officer that any of the purchases were not found to be recorded in the books of accounts. The found to be recorded in the books of accounts. The difference in the difference in the valuation as on the date of the survey as compared to the valuation valuation as on the date of the survey as compared to the valuation valuation as on the date of the survey as compared to the valuation at the time of purchase time of purchase comprises in the profit and loss account at the profit and loss account at the time of recording sales. Therefore, the assessee was not required sales. Therefore, the assessee was not required to offer the said profit during to offer the said profit during the year under consideration. Despite the year under consideration. Despite the assessee has enhanced value of the closing stock as on the date the assessee has enhanced value of the closing stock as on the date the assessee has enhanced value of the closing stock as on the date of the survey and included included the same for the purpose of declaring the same for the purpose of declaring profit. In such scenario, the said disclosure would be at maximum profit. In such scenario, the said disclosure would be profit. In such scenario, the said disclosure would be in the nature of bu the nature of business profit and it cannot be cannot be treated as unexplained expenditure to be taxed u/s 115BBE of the Act. The unexplained expenditure to be taxed u/s 115BBE of the Act unexplained expenditure to be taxed u/s 115BBE of the Act invoking of the said section by the Assessing Officer is without invoking of the said section by the Assessing Officer is without invoking of the said section by the Assessing Officer is without substantiating that any any purchase of the assessee was in the nature purchase of the assessee was in the nature of the unexplained purchases. The sources of the purchases by the purchases. The sources of the purchases by the purchases. The sources of the purchases by the assessee are duly explained and only assessee has offered the assessee are duly explained and only assessee has offered the assessee are duly explained and only assessee has offered the difference in valuation of the stock and said valuation was recorded difference in valuation of the stock and said valuation was recorded difference in valuation of the stock and said valuation was recorded by the assessee in the note found during the course of survey. In by the assessee in the note found during the course of survey. In by the assessee in the note found during the course of survey. In
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the facts and circumstances discussed above, we set aside the order d circumstances discussed above, we set aside the order d circumstances discussed above, we set aside the order of the Ld. CIT(A) on the on the issue in dispute and direct the Assessing issue in dispute and direct the Assessing Officer to cancel the action of the taxing the undisclosed profit the action of the taxing the undisclosed profit the action of the taxing the undisclosed profit declared by the assessee by the assessee u/s 115BBE of the Act. The grounds of u/s 115BBE of the Act. The grounds of appeal of the assessee are accordingly allowed. al of the assessee are accordingly allowed.
In the result, the appeal of the assessee for assessment year In the result, the appeal of the assessee for assessment year In the result, the appeal of the assessee for assessment year 2007-08 is partly allowed whereas appeal for assessment year 08 is partly allowed whereas appeal for assessment year 08 is partly allowed whereas appeal for assessment year 2018-19 is allowed.
Order pronounced in the open Court on nounced in the open Court on 28/08/2023. /08/2023. Sd/ Sd/- Sd/- Sd/ (SANDEEP SINGH KARHAIL SANDEEP SINGH KARHAIL) (OM PRAKASH KANT) (OM PRAKASH KANT) JUDICIAL MEMBER JUDICIAL MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER Mumbai; Dated: 28/08/2023 Rahul Sharma, Sr. P.S. Copy of the Order forwarded to Copy of the Order forwarded to : 1. The Appellant 2. The Respondent. 3. CIT 4. DR, ITAT, Mumbai 5. Guard file. BY ORDER, BY ORDER, //True Copy// (Assistant Registrar) (Assistant Registrar) ITAT, Mumbai ITAT, Mumbai
