FRONTLINE DIAMOND PVT. LTD.,MUMBAI vs. DCIT - CC -8 (3), MUMBAI

The facts in these cases are identical, the parties also argued them together and the learned CIT (A) has also decided this issue each of the assessee generally. to 891/Mum/2019 (Assessment Years 2008-09 to 2014-15) Shri Gautam Bhanwarlal Jain Through legal heir Mrs. Pooja Jain

First, we take up appeals in case of late Shri Gautam Bhanwarlal Jain filed through legal heir Ms Pooja Jain for assessment year 2008 – 09 to assessment year 2014 – 15.

Accordingly, notice under Section 153A of the Act was issued on 5 November 2014. The assessment was culminated on 18th March, 2016, where the addition was made by the learned Assessing Officer on account of commission income earned on accommodation entries of sales, import purchase, loans and advances for various years.

Aggrieved assessee preferred the appeal before the learned CIT (A).

At the time of hearing before the learned CIT (A), assessments for A.Y. 2009-10 to 2014-15, were also resulted into the similar addition for the respective years. The learned CIT (A) confirmed the above addition. Over and above, the learned CIT (A) found that there is no addition of commission income on imported purchases and local purchases and therefore, he also computed 1% accommodation entry commission on these entries. Accordingly, in case of Mihir Diamonds, he enhanced income of

Assessee is in appeal in all these years before us.

At the time of hearing, assessee filed an additional ground of appeal stating that the addition is made in all these years without any incriminating material as well as without discovering any undisclosed income or assets. Assessee relied on several judicial precedents and mainly in case of Smt. Kalpana Mukesh Ruia Vs DCIT of co-ordinate Bench in to 6521/Mum/2019 dated 31st December, 2020. Assessee also filed a consolidated chart of grounds of appeal.

On the earlier occasion, the bench directed the learned Assessing Officer to submit his comments on additional ground raised. The comment of the learned Assessing Officer was received on 15th March, 2023. The comments are as under:-

The learned Authorized Representative submitted that search took place on 3 October 2013 in case of the assessee. Therefore,

The learned Departmental Representative in response submitted the decision of co-ordinate bench in case of DCIT Vs. M/s Skyway Infra Projects Pvt. Ltd. dated 28th February, 2023, in for seven assessment years. In this case, the learned Departmental Representative specifically referred to paragraph no.8.3 to 8.7 stating that information in the form of

We have carefully considered the rival contentions and perused the orders of the lower authorities. First, we determine that what are the concluded assessments before the date of search are. The date of search is 3 October 2013. Therefore, assessment proceedings up to A.Y. 2013-14 were concluded and not open on the date of search i.e. 3 October 2013. However, for A.Y. 2014-15 is a pending assessment as on the date of search and therefore, that shall abate. Therefore, in case of this assessee the addition if any to be made up to A.Y. 2013-14 shall be based on incriminating material found during the course of search. For A.Y. 2014-15, the assessment would be made under Section 143(3) read with section 153A of the Act on the basis of information contained in the return of income as well as any information available with the learned Assessing Officer during

The fact also clearly shows that assessee has originally made a statement during the course of search about providing accommodation entries. This statement was also recorded in case of other assessees. The statement originally made by the assessee was retracted. Therefore, issue before us is whether on the basis of statement made by the assessee any absence of any other incriminating material, addition can be made or not in concluded assessment years. The answer has been given by the Hon'ble Delhi HC in case of PCIT vs. Best Infrastructure (India) (P.) Ltd. [2017] 397 ITR 82 (Delhi), wherein the question of law framed as per paragraph no.3, the Hon'ble High Court in paragraph no.44 has categorically held that the addition made under Section 68 of the Act on account of statement made by the Assessee's Directors in the course of search under Section 132 of the Act were rightly deleted by the ITAT. Vide Para no.45, it was further held that having regard to the materials seized in the course of search under Section 132 and the statements made on behalf of the Assessee, the assumption of jurisdiction under Section 153A of the Act and the consequent additions made by the AO are not justified. In this case, the Hon'ble High Court was concerned with statement made by Mr. Tarun Goyal and further statement made by the director of the company admitting the concealed income. In these circumstances, after considering the decision of Hon'ble Delhi High Court in case of PCIT vs. Meeta Gutgutia [2017] 82 taxmann.com 287 (Delhi) and Smt. Dayawanti Gupta v. CIT [2016] 390 ITR 496 (Delhi) and further relying on the decision of CIT v. Kabul Chawla [2016] 380 ITR 573 (Delhi) and CIT v. Continental Warehousing Corpn. (Nhava Sheva) Ltd. 374 ITR 645 (Bom.), in paragraph no. 38 of the Act has

Further, Hon'ble Delhi High Court recently in PCIT Vs. Shiv Kumar Agarwal [2022] 143 taxmann.com 55 (Delhi) has categorically held that the additions solely made relying on the disclosure made by a MD of a company the additions are not justified. Further, in case of PCIT vs. …...similar view was taken following the decision of Best Infrastructure (India) (P.) Ltd. (supra). Recently in the case of PCIT vs. Pilot Industries Ltd. [2023] 146 taxmann.com 233 (Delhi) dated 19th October, 2022, the addition made on the basis of the statement of the assessee under Section 132(4) of the Act was not considered as incriminating material. Further, the co-ordinate Bench in in ACIT vs. M/s Kuber Khadyan Pvt. Ltd. dated 26th March, 2021, deleted the addition based upon the admission under Section 132(4) of the Act, holding that mere statement is not a incriminating material. Based on which addition can be made in the hands of the assessee.

Similarly, the co-ordinate Bench in in case of Brahmputra Finlease Pvt Ltd dated 29th December, 2017, has also categorically held that the statement recorded under Section 132(4) of the Act do not constitute an incriminating material.

The learned Departmental Representative has relied on the decision of the co-ordinate Bench in case of M/s Skyway Infra Projects Pvt. Ltd. (supra). The leading decision of the Hon'ble Delhi High Court in case of Best Infrastructure (India) (P.) Ltd. (supra) was not at all considered. Further, in case of B Kishore Kumar (supra), there was a categorical finding that loose sheets and notings on telephone diaries pertaining to the assessee were found during the course of search. Based on this, the assessee

Accordingly appeal of the assessee for assessment year 2008 – 09 to assessment year 2013 – 14 are allowed in absence of any incriminating material.

With respect to A.Y. 2014-15, the addition is made by the learned Assessing Officer and further enhanced by the learned CIT (A). This assessment year is open but not concluded assessment at the time of search. As the date of search is 3/10/2013 therefore, the learned assessing officer has to make an assessment of the total income of the assessee based on the material found during the course of search as well as information contained in the return of income. Thus, there is no restriction to make an addition in the hands of the assessee, irrespective of any incriminating material found during the course of search.

The addition has been made in case of the assessee based on the statement of the assessee as well as several other persons. Though the books of accounts of the assessee are audited, however the learned assessing officer rejected the books of accounts for the reason that during the course of search the AO did not find any sign of any business activity at the premises, the premises were mostly locked, no physical infrastructure, no documents relating to the concern were found in those premises. Before the assessing officer, the assessee could not produce the evidence that how the material was purchased and sold, how goods have been transported/delivered etc. therefore the learned assessing officer issued notice under section 145 (3) of the act. The assessee contended that the books of accounts of the assessee are audited, the statement based on which the learned AO is relying have been retracted, assessee has furnished the details of purchases, sales and bank statements. In those books of accounts no defects have been shown. Further at the time of search also no evidences were found against the assessee. Further sum statements have been relied by the AO, cross-examination of those persons were not given to the

The learned AO on the basis of the modus operandi of providing accommodation entries held that assessee has not carried out any actual business transaction and no evidences of any actual business transaction was found at the time of search and none of the person could answer any of the questions which a person engaged in the business of diamond is supposed to. Based on this, the books of accounts of the assessee were rejected and profits were estimated. The learned CIT – A confirmed the same and enhanced the addition of commission income in the hence of assessee with respect to purchase and sales in various concerns of the assessee.

The arguments of the assessee were against the reliance on the statement and submitted that those statements have been retracted and not cross-examination of the person based on whose statement assessee is found to be an accommodation entry provider was granted. He further reiterated that the books of accounts are audited and supported by proper basis. In absence of any other material showing that the book result does not disclose the correct profit by finding out the defects in books of accounts, the learned AO could not have rejected the same.

The learned departmental representative supported the orders of the lower authorities.

We have carefully considered the rival contention and perused the orders of the lower authorities. In this case, when the search took place, there was no material found at the premises where the business of the assessee was stated to be carried on supporting the books of accounts of the assessee. No evidences, except the books of accounts, purchase and sales invoices and

In the result, appeal of the assessee for assessment year 2014 – 15 is allowed for statistical purposes.

In case of above captioned 4 assessee is the appeals are pertaining to various assessment years involving similar facts.

Therefore, for the reasons given by us in case of appeals filed by late Sri Gautam Bhanwarlal Jain, we hold that for the appeals pertaining to assessment year 2008 – 09 to 2013 – 14 are concluded assessments and therefore merely on the basis of the

For appeal of assessment year 2014 – 15 for all the above four assessees are set aside to the file of the learned assessing officer as per our direction given in the appeal of late Sri Gautam Bhanwarlal Jain for a by 2014 – 15.

Accordingly, all 27 appeals in case of these 4 assessees are disposed of as above.

These are the five appeals of the same assessee involving the similar facts.

For assessment year 2007 – 08 assessee filed its return of income on 16/10/2007 declaring a total income of ₹ 309,324/–. The case was reopened for assessment year 2007 – 08 recording the reasons that assessee is engaged in the activities of providing accommodation

The assessee has challenged the reopening of the assessment as well as the addition on the merits of the case.

We have heard the rival contentions and find that the reopening has been made on the basis of reasons recorded by the learned assessing officer wherein the information is received from the investigation wing. Further search was carried out in case of Shri Gautam Jain and others in his group. It was found that assessee is part of that group. We find that there is a tangible material available with the learned assessing officer to reopen the assessment in case of the assessee. In view of this, we do not find any infirmity in the order of the learned assessing officer in reopening the case by issuing notice under section 148 of the act. The learned CIT – A has also confirmed the same for the reason that the learned assessing officer has tangible material. Therefore, all the grounds

On the addition on the merits, we find that identical issue arose in case of Mr. Gautam Jain for assessment year 2014 – 15 wherein we set aside the whole issue back to the file of the learned assessing officer with a direction to the assessee to substantiate the transaction of purchase and sales. Accordingly, with similar direction, the addition on the merits set-aside to the file of the learned assessing officer.

In all these, five appeals similar issues are involved with respect to the merit. Therefore, all these five appeals are restored to the file of the learned assessing officer to decide the addition on the merits of the case.

Accordingly, all the file appeals of the assessee are partly allowed for statistical purposes.

On identical facts and circumstances in case of Mr. Gautam Jain for assessment year 2014 – 15 via set-aside the issue back to the file of the learned assessing officer with a direction to determine the income of the assessee afresh, with similar direction, all these three appeals are also restored back to the file of the learned assessing officer.

Accordingly, all these three appeals of the assessee are allowed for statistical purposes. & 2276/Mum/2019 (Assessment Year 2014-15 & 2013-14) [Two Appeals] Frontline Diamond Put Ltd 047. These are the two appeals of the assessee filed against the Consolidated appellate order passed by the learned CIT – A on 31/1/2019 wherein the addition made by the learned assessing officer with respect to the commission income on by the assessee at the rate of 0.5% on total turnover and further enhanced by the addition of ₹ 3 and 67,26,374/– on account of commission income on accommodation entries.

Both the parties confirmed that the facts are identical to the case of these Mr. Gautam Jain for assessment year 2014 – 15.

We have carefully considered the rival contention and find that we in the case of Mr. Gautam the new set-aside the issue back to the file of the learned assessing officer for assessment year

In the result, both the appeals are allowed for statistical purposes.

These are the three appeals filed by the assessee against appellate order passed by the Commissioner of income tax appeals – 50, Mumbai dated 31/1/2019 for assessment year 2012 – 13, 2013 – 14 in 2014 – 15.

Both the parties confirmed that identical issue of India decided in the case of Mr. Gautam Jain.

We find that in the present case also, the assessment year 2012 – 13 and 2013 – 14 are concluded assessment and the additions have been made merely on the basis of the statements which are been retracted by the respective parties. In case of Mr. Gautam Jain for assessment year 2008 – 09 to 2013 – 14, we have held that these are the concluded assessment, which can be disturbed only on the basis of the incriminating material found during the course of search. As the facts and circumstances in the case of the assessee are also similar for assessment year 2012 – 13 and 2013 – 14, for the similar reasons we allow the appeal of the assessee.

Accordingly, appeal of the assessee for assessment year 2012 – 13 and 2013 – 14 are allowed and appeal of the assessee for assessment year 2014 – 15 is allowed for statistical purposes.

These are the three appeals in case of this assessee for assessment year 2012 – 13, 2013 – 14 and 2014 – 15 against the appellate order passed by the learned Commissioner of income tax (appeals) – 50, Mumbai dated 31/1/2019 against the addition made by the learned assessing officer and further enhanced by the learned CIT – A on account of commission income earned on accommodation entries.

Both the parties confirmed that the facts are identical to the facts of the case of Mr. Gautam Jain. We find that in case of assessment year 2012 – 13 and 2013 – 14 the addition is made on the basis of the statements, which have been retracted, by the assessee and several other persons. Identically in case of Mr. Gautam Jain we have held that in absence of any incriminating material found during the course of search, no addition can be

For assessment year 2014 – 15, we set-aside the whole issue back to the file of the learned assessing officer in case of Mr. Gautam Jain to decide the income of the assessee afresh. With similar direction we set-aside the appeal of the assessee back to the file of the learned assessing officer.

In the result appeal filed by the assessee for assessment year, 2012 – 13 and 2013 – 14 are allowed and appeal for assessment year 2014 – 15 is allowed for statistical purposes.

In the result, all the 50 appeals involved in this group of appeals are disposed of accordingly.