ARUNKUMAR GOPALDAS AGRAWAL,MUMBAI vs. ASSISTANT COMMISSIONER OF INCOME TAX-19(1), MUMBAI

We have considered the rival submission and perused the material 9. on record. The Assessee claimed deduction for expenses incurred for purchase of rough diamonds and was, therefore, required to place on record all details and documents to show that the purchase transactions were genuine. The Assessee placed on record (Assessment Year 2012-13) ITA No.986/Mum/2023 (Assessment Year: 2012-13) purchase invoices and details of payments made through banking channel along with extract of bank statements and confirmations from the vendors/suppliers. On perusal of the same the Assessing Officer noticed that out of total purchases of INR 11,33,97,450/- for which deduction was claimed by the Appellant during the relevant previous year, the purchases aggregating to 11,12,70,313/- were made from concerns forming part of Bhanwarlal Jain Group. As per the report of the investigation wing, Bhanwarlal Jain controlled and managed 70 concerns including M/s Mohit Enterprises, M/s Mahalaxmi Gems Pvt. Ltd., M/s Megha Gems, and M/s Pushpak Gems (hereinafter collectively referred to as ‘the Sellers’). The case of the Assessee is that the Sellers were engaged in genuine business and that the material on the basis on which conclusion was reached by the Assessing Officer that the Sellers were engaged in providing accommodation entries was not given to the Assessee. The Assessee has also contended that the material on which the Assessing Officer placed reliance was not given to the Assessee. In this regard we note that the report of the Investigation Wing in came up for consideration before the Tribunal in the case of Bhanwarlal M. Jain Vs. DCIT Central Circle- 1(3): ITA No.98-104, 108-114, 2669, 3509/Mum/2018, dated 06/08/2021. The Tribunal, in paragraph 2.18 of the decision, observed that the assessing officer had noted that in effect, the Bhanwarlal Jain Group provided three types of accommodation entries viz. (i) accommodation entry for loans and advances; (ii) accommodation entry for bogus purchases; (iii) Imports made on behalf of real importers. After taking into consideration the factual and legal position, the Tribunal returned the following findings: “6. Going by the factual matrix as enumerated in preceding paragraphs, we find that the attitude of the assessee during ITA No.812//Mum/2023 (Assessment Year 2012-13) (Assessment Year: 2012-13) the course of assessment proceedings was totally non- cooperative. In fact, the assessee remained absent during search proceedings for 3 days. The summons were not complied with and no explanation was furnished on incriminating material. Pertinently, voluminous hand written estimation sheets have been found at various premises of the assessee. The sheets have been admitted to be in the hand writing of assessee’s son as well as an employee of the assessee. These sheets contain parallel cash accounts. The entries in the estimated sheets were in the nature of square- off transaction wherein cash received from one party was paid back to another party through Angadiya Account. The pen drive contained calendar year-wise names of beneficiaries, the amount of cash, details of brokerage and commission etc. It also contained complete details of Angadiya Account since 2004 in electronic form. The parallel account maintained on the pen-drive pertained to various concerns, 70 to be precise, being managed and controlled by assessee group. The password of the pen drive was cracked with the help of software programmers. After decrypting the data, print outs were taken and matched with the estimation sheets as well as other data gathered during the course of search action from various premises, disclosed as well as secret. The data was found to be identical. The complete correlation was established between the parallel books of accounts found on the pen drive with books of 70 concerns being managed and controlled by the assessee. It transpired that the daily accounts were first written manually on estimation sheets and thereafter entered into pen-drive electronically. So much so, identical pen drive was found from the possession of Shri Rohit Birawat at CST Terminus who was apprehended by the search team while attempting to flee from Mumbai to Rajasthan with incriminating material.

All these facts have been admitted not only by the assessee but also by his son as well as trusted employees in various statements as recorded on oath u/s 132(4) at various points of time. The statements were recorded in the presence of independent witnesses. The contents of the statement were said to be duly explained to the assessee at the time of recording thereof.

In the backdrop of such clinching and overwhelming evidences, no substance could be found in the plea that the pen-drive did not belong to the assessee or the same was not found from assessee’s premises particularly when the contents of the pen drive completely matched with incriminating material found during the course of search operations. The seizure of the same was duly recorded in the Panchnama which was vouched by independent Panchas. The vital link was established between the pen drive and the estimate sheets as well as the regular books of benami concerns being run by the assessee. Therefore, we do not find any substance in this plea as raised by Ld. AR before us and therefore, we reject the same.

So far as the other arguments are concerned, we find that that the assessee was running more than 70 benami concern under name-sake directors / partners /proprietors. These persons were acting as per the direction of the assessee against remuneration. Most of them, in their statement u/s 132(4), made admission of those facts. They also made admission that they assisted / abetted the assessee in the business of providing accommodation entries. Their PAN Cards, IDs, blank signed cheque books etc were found at centralized premises. They were visiting the centralized premises to sign the blank cheque books as per the directions of the assessee. All these persons had superficial knowledge about nature of business being conducted by their respective concerns. Further, most of these persons were residing at premises owned by the assessee group. The books of accounts of all these entities were being maintained at two premises in a centralized manner. The books were found in the same computer and audited by common Auditor. The auditor admitted to have signed the financial statements as per the directions of Shri Lunkaran Parasmal Kothari without verifying the books of accounts. This is further fortified by survey action at BKC, Mumbai wherein more than 30 firms were found to be operating from common premises. All the 70 entities were found to have common features in their respective financial statements. All these factors strongly prove the allegations of the (Assessment Year 2012-13) ITA No.986/Mum/2023 (Assessment Year: 2012-13) department that all the concerns were being run by the group in a combined manner with a view to provide accommodation entries to various beneficiaries against commission.

So far as the retraction of the statement made by the assessee is concerned, we find that the retraction was made after more than 8 months and the same was devoid of any material evidence. The statements were made on oath u/s 132(4) and heavy onus was on assessee to rebut the same with cogent material while retracting the same. However, nothing of that sort as done by the assessee, has been shown before us. Glaring contradictions as well as similarities has been found in the retraction affidavits. As rightly held by lower authorities, the retraction was nothing but mere after- thought and tutored statement to thwart the process of investigation. The retraction was bereft of any material evidence and therefore, the same was to be completely ignored.

The aforesaid factual matrix as well as findings would lead to inescapable conclusion that all the 70 entities under consideration were being managed and controlled by the assessee group and therefore, lower authorities were quite justified in estimating commission income earned by the assessee group from all these benami concerns.” (Emphasis Supplied) Thus, the Tribunal held that the all the 70 concerns of the 10. Bhanwarlal Jain Group were benami concerns engaged in providing accommodation entries for bogus purchases on commission basis. Thus, the contention of the Assessee that the purchases made from the Sellers, forming part of Bhanwarlal Jain Group, represented genuine business cannot be accepted. Give the facts of the case, the onus was on the Assessee to prove the genuineness of the purchases. The substance of the information contained in the Investigation Wing Report was put to the Assessee and full particulars of the case that the Assessee was expected to meet was (Assessment Year 2012-13) ITA No.986/Mum/2023 (Assessment Year: 2012-13) also communicated. Further, ample opportunity was granted to meet such case and produce necessary details/documents in support of claim for deduction was also provided. In response, the Assessee furnished purchase invoices, stock-statement, extract of bank statement showing payments, balance confirmation etc. However, the Assessing Officer was not convinced and concluded that the Assessee had merely taken bills from the Sellers. Though the Assessee had made entry in stock statement, the Assessee was not able to furnish explanation regarding manufacturing process and consumption/yield. Therefore, the Assessing Officer rejected the books to the extent of purchases recorded therein. A copy of the aforesaid documents relied upon by the Assessee have also been placed before us as part of the paper-book. However, the same do not inspire confidence being standard document prepared for all purchases. The purchase invoices and the documents relating to processing of the rough diamonds give only general detail of the diamonds. This becomes evident on perusal of the sales invoices issued by the Assessee itself where details of the diamonds are given. Therefore, we do not find infirmity in the order passed by the Assessing Officer in rejecting the books of accounts to the extent of purchases are recorded therein in terms of Section 145(3) of the Act as the Assessing Officer was not satisfied about the correctness of the books. The judgments on which reliance has been placed by the Assessee do not apply to the case of the Assessee given the peculiar facts of the case noted hereinabove. Therefore, we confirm the finding returned by the Assessing Officer and the CIT(A) and hold that the Assessee failed to prove that the purchases made from the Seller were genuine.