DCIT CC 40, MUMBAI vs. SUSHANT MAHADEO MALEKAR, MUMBAI

These are the cross appeals in case of Shri Sushant M. Malekar (assessee/ appellant) for A.Y. 2008-09 against the

The Ld. CIT(A) erred in not appreciating that all these ten loan creditors are big taxpayers paying taxes in crores of rupees and the Appellant had furnished their PAN Nos. to the ACIT so that with the help of these PAN Nos. he could trace their ITOS and in turn their addresses and serve on them u/s. 131 of the Income-tax Act, 1961.

The case of the assessee was picked up for scrutiny under the compulsory ground that assessee’s turnover is more than 20 crores. Several notices were issued to the assessee but no compliances were made. Ultimately, the counsel of the assessee attended on 17th 06. December, 2009 and submitted statement of total income, profit and loss account, balance sheet under the covering letter. The current address of the assessee was also stated to be at D-9, Heena Garden Complex, Pipeline Road, Khadakpada, Kalyan. It was also stated that assessee has discontinued his business with effect from June, 2008.

The learned Assessing Officer noted that assessee has a proprietary concern in the name of M/s Swastik Enterprises and has shown sales of ₹658,80,98,525/- as cash sales. Assessee states that he sold the gold and silver to individual parties. Assessee did not submit any documentary evidences for verification that transactions are in fact made. The complete name, address and payment details were also not submitted for verification. In most of the sale bills, the delivery is ‘hand to hand’. Thus, assessee has sold gold and silver on cash basis and has not given documentary evidences to prove that these sales are genuine. The learned Assessing Officer further found the fact in month wise summary in sales and purchases submitted. The bank statement of the assessee was also verified which did not show any reasoning of cash deposited and its subsequent withdrawal. Accordingly, the learned Assessing Officer a. treated the total sales amount as undisclosed income of the assessee under Section 68 of the Income-tax Act, 1961 (the Act). b. Further, the assessee has shown unsecured loans of ₹43,49,79,005/-. Assessee submitted the details c. The assessee has also incurred losses on trading of ₹1,34,28,014/-, no details were furnished and therefore, same was not allowed.

Assessee preferred the appeal before the learned CIT (A). During hearing, assessee submitted certain details and sample copies of sales bills. The learned CIT (A) called for the remand report. a. With respect to the addition of sales, the learned CIT (A) considered that assessee has purchased gold worth ₹403 crores from M/s Riddhi Siddhi Bullion Ltd. and ₹155 crores from M/s Hundia exports. In the assessment of these two parties for A.Y. 2007-08, the entire purchases were made by the assessee was accepted. He further noted that assessee has made total gross profit of ₹42 lacs in cash transaction contrary to the observation of the learned Assessing Officer that no margin of profit was shown by the assessee. He further held that assessee has given the names of the customers and such sales were made out of the purchases from the above two parties. He further held that assessee has never b. With respect to the trading loss of ₹1,34,28,014/- based on the verification of the contract notes and the copies of the ledger account of the assessee with MCX and NCDEX. c. With respect to the unsecured loan of ₹43,49,79,005/-, the learned CIT (A) after taking the remand report, he held that assessee has failed to establish the identity and creditworthiness of the creditors and the genuineness of the transaction and therefore, same is confirmed. However, he deleted the addition to the extent of ₹6,87,89,490/- pertaining to Union Bank of India.

We first come to the appeal of the assessee.

Assessee has raised the following additional grounds of appeal as under:-

At the time of hearing, the assessee submitted the copy of the affidavit of Assessee dated 11th March, 2020, wherein assessee submitted that he belongs to poor family and one Mr. Dinesh Jani in the year 2005, motivated him to do some illegal business transaction. His affidavit is as under:-

All along, I made myself clear to M/s. Riddhi Siddhi Bullion Ltd and Shri. Dinesh Jani that I belong to a poor family and my monthly income is approximately Rs.25,000/- which is hardly sufficient to look after both the educational expenses of my child as well as maintenance of my family. Practically, there are no savings during the last fifteen years.

Shri. Dinesh Jani sometimes in the year 2005 motivated me to do some illegal business transactions of the following parties. In friendship, I listened to him and signed wherever Shri. Jani asked to me to sign the papers. I have no capacity to do such big transactions running into crores of rupees. I am very very poor person, how I can do transitions of such big amounts? You may please enquire about my financial position both with Shri. Bhawarlalji Kothari and Shri. Jani who motivated me to do such illegal business

I have asked Shri. N.M. Porwal to see that the entire appeal is allowed and there is zero demand. Otherwise, I will come to the Tribunal personally and tell the court that I have nothing to do with all these transactions. They are benami transactions and the Hon'ble Bench may pass an order accordingly. If the

Therefore, in the nutshell, the submission of the assessee is that he has not done any transaction but it is Mr. Dinesh Jani and Mr. Shri. Bhawarlalji Kothari, who motivated him to do the bogus business. In nutshell, the statement of the assessee also says that purchases showed by him from M/s. Riddhi Siddhi Bullion Ltd. are bogus.

The learned Departmental Representative vehemently supported the order of the learned Assessing Officer. It

We have carefully considered the rival contentions and perused the orders of the lower authorities. In the present case, the assessee himself on an affidavit stated that he is a person of no means and did not carry on of such huge business. He on an affidavit has stated that his purchases from M/s. Riddhi Siddhi Bullion Ltd. are bogus and his cheque book is also in the custody of Mr. Dinesh Jani of M/s. Riddhi Siddhi Bullion Ltd. Therefore, the finding of the learned CIT (A) falls flat. Now it cannot be said that purchases shown by Ridhi Sindhi Bullion and Hundia Exports to assessee is genuine. Even an affidavit of the assessee says that his purchase from M/s. Riddhi Siddhi Bullion Ltd. is bogus. Thus deletion of entire purchases of the assessee accepting it as genuine is not sustainable.

Further, the sale consideration received by the assessee is also in cash. There is no address of the parties who purchase the gold and silver from the assessee. Therefore, the whole transaction of purchase and sales shown by the assessee is merely a façade. The learned CIT (A) deleting the addition on account of sales and simultaneously accepting sales made by the assessee as also genuine is absolutely incorrect.

Similar is the case with respect to unsecured creditors appearing in the books of assessee cannot be accepted as genuine as sales and purchases both are not genuine.

Therefore, it is a clear-cut case that somebody else is operating on behalf of the assessee by using his bank account and of course, assessee cannot also be stated to be ignorant of the situation. Therefore, the assessee as well as the person who are trading with the assessee such as M/s. Riddhi Siddhi Bullion Ltd. is entering into purchase and sales of gold and silver with some ulterior motive.

In view of this, we set aside the whole appeal filed by the learned Assessing Officer as well as the assessee back to the file of the learned Assessing Officer to re-investigate the whole aspect of the huge transactions of purchases and sales of Gold and silver and to find out who are the real beneficiaries of these transactions. Prime facie it seems that Riddhi Sidhi Bullion and Hundia Exports have booked huge bogus sales in the name of this assessee. The proper examination of operation of bank account of the assessee by finding out who opened bank account, who operated it , who is beneficiary of the entries in bank account of assessee, who deposited the cash in bank accounts, in whose accounts the money is credited from

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