PRIYANKA SANDEEP RUNWAL,MUMBAI vs. THE DY CIT CC-4(1), MUMBAI

A common issu therefore, the same w this common order repetition of facts. 3. Firstly, we take ITA No. 6524/Mum/2 the lead and decis mutandis. The ground 1. In the fact Hon'ble Comm that the notice accordance w Deputy Comm "reason to be Act, 12 1961 CIT(A)-52 is d 1961 is held t 2. In the fact Hon'ble Comm confirming th Income Tax, money' on pu Expenditure. appreciating Appellant du statements re no show-caus prays that th the addition is 3. In the fact Hon'ble Comm holding that deponents, no statements an of natural jus Pri ue in dispute is involved in the were heard together and dispos for the sake of convenience up the appeal for assessment y 2024. The parties agreed to tak sion of the same might be a ds raised in appeal are reproduc ts and circumstances of the case and missioner of Income Tax (Appeal) 52 erre e u/s 148 of the Income-tax Act, 1961 w with the provisions of the Act and that missioner of Income Tax, Central Circle elieve" to issue the notice u/s 148 of the . The appellant prays that the order of dismissed and notice u/s 148 of the Inc to be bad in law and is liable to be quash ts and circumstances of the case and missioner of Income Tax (Appeal) - 52 h he action of the Learned Deputy Com Central Circle - 4(1) implicating the pay urchase of jewellery of Rs. 56,00,000 as The confirming action was ma the fact that no 'evidence' was 'prov uring the re-assessment and based on ecorded in the search action on a third pa se notice was given to the Appellant. T he said action of Hon'ble CIT(A)-52 is dis s deleted. ts and circumstances of the case and missioner of Income Tax (Appeal) - 52 h the absence of cross-examination of ot providing the Appellant with copies of nd evidences relied on does not violate t tice. The appellant prays that the order of iyanka Sandeep Runwal year 2014-15 in ke this Appeal as applied mutatis ced as under: the law, the ed in holding was issued in the Learned e - 4(1) had e Income-tax f the Hon'ble come-tax Act, hed. the law, the has erred in missioner of yment of 'On- Unexplained de without vided' to the n third party arty and that The appellant smissed and the law, the has erred in third party of third party the principles of the Hon'ble

4 In response to t the return of incom Assessing Officer iss Assessee complied w completed and Ord 10/12/2019 determi 4.5 Aggrieved, the A objected to the addi CIT(A) passed an ord Assessee on all groun 4.6 Aggrieved by the Appeal before the I Tribunal) by way of r 4.7 Ground No. 1 ch the Act was not pres dismissed as infructu Ground Nos. 2 & 3 alleged cash purcha 4.8 In Ground Nos addition of ₹56,00, unexplained expendit of jewellery from ent Pri the notice u/s 148 of the Act, th me declaring total income at ₹ sued requisite statutory notice with from time to time. Rea der u/s 147 r/w 143(3) w ning the total income at ₹85,05, Assessee filed Appeal before the itions made by the Assessing O der on 14/10/2024 dismissing t nds. e Order of the Ld. CIT(A), the ncome-tax Appellate Tribunal raising grounds as reproduced a hallenging the validity of the no ssed by the Assessee and theref uous. 3 – Addition of ₹56,00,000/- ase of jewellery (“on-money”) s. 2 and 3, the assessee ha ,000/- made by the Assess ture, allegedly incurred towards tities of the Nirav Modi / Fires iyanka Sandeep Runwal ₹29,05,430. The es to which the assessment was was passed on ,430. e Ld. CIT(A) and Officer. The Ld. he appeal of the e Assessee filed ( in short the above. otice u/s 148 of fore the same is on account of as assailed the sing Officer as s cash purchase star group. The principal grievance o exclusively on third-p during search and s without furnishing granting an opportu requests made during 4.9 A search and sur Wing in the case o Diamond Pvt. Ltd., K action, it was allege making cash sales o regular books of acco digital records were reflected such sales m that the stock corre through branch tran disclosed in the book and sales personnel of the Act, wherein partly or wholly, agai assessee was stated assessment years, na 16 (₹10,00,000/-) an ₹1,02,50,000/-. On Pri of the assessee is that the addi party digital material and state survey operations in the case o such material to the assesse unity of cross-examination, d g the assessment proceedings. rvey action was carried out by t of the Nirav Modi group, inc Kala Ghoda, Mumbai. During the edly noticed that the group w of jewellery without recording t ount. During the course of the e found which, according to made outside the books. It was esponding to such cash sales nsfers and that the cash comp ks of account. Statements of ce of the group were recorded un a general modus operandi of inst jewellery sales was stated. T d to appear in such digital re amely A.Y. 2014-15 (₹56,00,000 nd A.Y. 2016-17 (₹36,50,000/-) the basis of such information iyanka Sandeep Runwal 0/-), A.Y. 2015- , aggregating to n the Assessing

10 The Assessing O source of investmen categorically denied h Modi or Firestar D contended that the Wing, allegedly comp assessee’s name, a employees, were nev submitted that no e Assessing Officer t exchanged hands be assessee also conte establish either the s the seller through an Pri for the year under consideratio lery in cash amounting to ₹56,0 ted as under: ion- Sales person FS Style Product Sel ce Aparna Chudasama ES- BG346PP Bangle INR 14 al re m Aparna Chudasama SO-RG330 Ring INR 33 ion Aparna Chudasama FL-ER578 Earrings INR 9,0

6 The Ld. CIT(A) Delhi High Court in A and the Hon’ble Pu Products of India (15 may collect informat framing the assessme support the addition the Hon’ble Bombay (264 ITR 154) to hold be genuine or above b 5.7 With regard to t CIT(A) held that the Reliance was placed State of J&K v. Bak Union of India, Kanun Chhabra v. Union of Director of Enforceme examination depends thereof does not ipso natural justice, unles 5.8 On the basis of that sufficient mate Assessing Officer and Pri also referred to the decisions Addl. CIT v. Jay Engg. Works Ltd njab & Haryana High Court i 50 ITR 714) to hold that the A tion in any manner and utilis ent, provided there exists mater . Reference was further made to High Court in ITC Classic Fina d that where a transaction doe board, the addition deserves to b the plea of denial of cross-exam e right to cross-examination i on several judicial pronouncem kshi Gulam Mohd., Nath Intern ngo & Co. v. Collector of Custom f India and Telestar Travels Pvt ent, to conclude that the requir s upon the facts of each case o facto amount to violation of t ss prejudice is demonstrated. f the above reasoning, the Ld. C erial existed to sustain the f d that no violation of the princ iyanka Sandeep Runwal of the Hon’ble d. (113 ITR 389) in CIT v. Metal Assessing Officer se the same for rial on record to o the decision of ance Ltd. v. DCIT es not appear to be sustained. mination, the Ld. s not absolute. ments, including national Sales v. ms, Surjeet Singh t. Ltd. v. Special rement of cross- and that denial the principles of CIT(A) concluded findings of the ciples of natural justice had occurred made for Assessmen Nos. 2, 3, 4 and 5 rai 6. As regards the gro Ld. counsel for the a rests solely on two al in the form of charts search operations in statements of certain the course of the sear digital material nor t furnished to the a proceedings. 6.1 The Ld. counse Chudasama, heavily name the assessee transaction to her. business practice al accepting cash, part emphasised that no has been brought on purchased any jewel has consistently deni Pri d. Accordingly, the addition o nt Year 2014-15 was confirme ised by the assessee were dismis ounds relating to the merits of t assessee submitted that the imp lleged pieces of material, namely s reflecting purported cash sale n the case of the Nirav Modi n employees of the said group, r rch. It was contended that neith the statements of the said empl assessee at any stage of the el submitted that the statement relied upon by the Assessing O e nor does it attribute any At best, the statement refer llegedly followed by the Nirav tly or wholly, against jeweller credible or independent corrobo n record to establish that the a llery or made any cash paymen ied the alleged transaction. iyanka Sandeep Runwal of ₹56,00,000/- ed and Ground ssed. the addition, the pugned addition y: (i) digital data es found during group; and (ii) recorded during her the complete loyees were ever e reassessment t of Ms. Aparna Officer, does not y specific cash rs to a general Modi group of ry sales. It was orative evidence ssessee, in fact, nt. The assessee

2 It was further request made during 06.12.2019, the ass cross-examine the statements were relie of the Hon’ble Supr CCE (supra)to conten used against an asse examination. 6.3 The Ld. coun inconsistency in the In her statement rec categorically stated t 12.01.2015. Howeve 5.1 of the assessmen for transactions purp submitted that this g the credibility and re Assessing Officer. 6.4 In response to Representative that t the assessee filed a documents supplied Pri submitted that despite a spec the reassessment proceedings v sessee was not afforded any employees of the Nirav Mod ed upon. Reliance was placed o reme Court in Andaman Timb nd that statements of third pa essee without affording an oppor nsel further drew attention evidence relied upon by the As orded on 16.01.2017, Ms. Apar that she had joined the Nirav r, in the tabulation reproduce nt order, her name appears as t portedly undertaken in the yea glaring inconsistency strikes at liability of the digital records rel o the contention of the Ld the relevant material had been clarification note pointing ou comprised: (i) an information le iyanka Sandeep Runwal ber Industries v. arties cannot be rtunity of cross- to a material ssessing Officer. rna Chudasama Modi group on ed in paragraph the sales person ar 2013. It was the very root of lied upon by the . Departmental n duly provided, ut that the only etter received by the Assessing Offic statement of Ms. Apa the Act on 19.04.20 that even this info evidence linking the it provide any deta purchased. 6.5 With regard to recorded on 19.04.20 never furnished with which formed the pr later statement clea shown a list of nam clients or potential cl stated that she did n the transactions men by the assessee. The mentions the name jewellery or confirmat 6.6 It was thus co Chudasama admit t cash from the Nirav statements, without Pri er from the Investigation Wi arna Chudasama recorded unde 18 along with an annexure. It ormation did not contain any alleged cash amounts to the as ails or description of the jew o the statement of Ms. Aparn 018, it was pointed out that th h the earlier statement recorded rimary basis of the addition. A arly shows that Ms. Chudasam mes and asked to identify whe lients of the Nirav Modi group. S ot remember the mode of payme ntioned and did not confirm any annexure accompanying the st of the assessee, without any tion of cash payment. ontended that at no point d that the assessee had purchas v Modi group. The reliance p t corroboration and without iyanka Sandeep Runwal ing; and (ii) a er section 131 of was submitted y documentary ssessee, nor did wellery allegedly na Chudasama he assessee was on 16.01.2017, A perusal of the ma was merely ether they were She categorically ent in respect of y cash payment tatement merely y description of did Ms. Aparna sed jewellery in placed on such t affording an opportunity of cros untenable. 6.7 Reliance was fu bench of the Hon’ble v. DCIT, Central Circ dated 2023), where purchases from the additions based sol without furnishing th an opportunity of cr was submitted that t the facts of the prese addition. 7. We have heard t material placed on search and survey a Modi group, includin at Kala Ghoda, Fort records were found recorded, wherein a partly, against jewell the stock correspond Pri s-examination, was submitted urther placed on the decision of Mumbai ITAT in Shri Avinash le–2(3) (ITA Nos. 529 & 530/Mu ein, on similar facts involvin e Nirav Modi group, the Trib lely on third-party statements he same to the assessee and w ross-examination, are unsustai the ratio of the said decision squ ent case and warrants deletion o the rival submissions and carefu record. It is an undisputed action was carried out in the ca ng the showroom of Firestar Dia , Mumbai. During such action d and statements of sales p general practice of accepting lery sales was stated. It was a ding to such cash sales was ad iyanka Sandeep Runwal nable in law. It uarely applies to of the impugned ully perused the position that a ase of the Nirav amond Pvt. Ltd. n, certain digital personnel were cash, wholly or also alleged that djusted through branch transfers and regular books of acco 7.1 The Assessing addition on two piece reflecting cash sales, of the Nirav Modi / under section 131 o group, particularly t tabulation of trans reproduced in the as complete digital dat neither furnished to despite specific req examination of the c unaddressed. 7.2 Even during th sheets pertaining to names of customers details of the jewe forthcoming. The dig alleged transaction a statements of third statements of the co Pri d the cash component was not ount. Officer has primarily rested es of material, namely: (i) digita recovered during search operat Firestar group; and (ii) state of employees and sales person the statement of Ms. Aparna sactions aggregating to ₹56 ssessment order. However, it is ta and the full statements re the assessee nor formally con quests. The assessee’s requ concerned third-party witnesses he course of hearing before u three financial years were show ( except assessee) were largely ellery allegedly sold to the gital material, by itself, does no and derives its entire evidentiary d-party employees. Likewise, oncerned employees were never iyanka Sandeep Runwal Chudasama. A 6,00,000/- was evident that the lied upon were nfronted to her, uest for cross- s also remained us, only partial wn, wherein the masked and no assessee were ot establish the y value from the the complete made available to the assessee be assessment order. T effective opportunity Assessing Officer. 7.3 It is well set substantially or exclu material, denial of an results in a serious reliance on third-par reasonable opportun conclusive proof of t such a foundation is the principles of natu 7.4 We also find fo statements relied up allegedly followed by specifically attribute contrary, there are a upon, including the that she joined the g sales person for trans Ms Chudsama is sa whereas. We note th Pri eyond selective extracts repr The assessee was thus deprive y to rebut the material relied ttled that where an additio usively on third-party statemen n opportunity to cross-examine procedural infirmity. In such ty statements, without affording ity to test their veracity, cannot the alleged transaction. Any ad s liable to be struck down as b ural justice. rce in the contention of the as pon merely describe a general m the Nirav Modi group. None of any cash payment to the as apparent inconsistencies in the fact that Ms. Aparna Chudasa group only in January 2015, i sactions allegedly undertaken in aying that cash transaction we hat there is a contradiction in t iyanka Sandeep Runwal ssessee. On the e material relied ama, who stated is shown as the n the year 2013. re not recorded the statement of the employees Ms. Sourabh Jitendra Sh sales were not recor Shah is saying all su the books of accoun the credibility of the e 7.5 The Assessing independent corrobo in fact, purchased jew of jewellery, no trail Assessing Officer ha assessments in the c not entered into the b reduced by way of br Assessing Officer has of Nirav Modi gro uncorroborated third 7.6 It is trite law governed by the stri requirements of fairn with. Furnishing o opportunity to effecti way of cross-examin Pri

15 Similarly, relian v. Ramjee (supra) i principles of natural stretched to legitim safeguard where the party material. The witnesses, where the an addition, is not a fair procedure. 7.16 The observation Hersh W. Chadha v. preponderance of pro Revenue. In the pres the alleged transact relied upon as wel witnesses. In the evidence such as c jewellery, flow of fun could not be said to third-party statement 7.17 The proposition the strict rules of the CIT(A) with reference Pri nce on the decision in Chairma is misconceived. While it is l justice are flexible, such flexib mise denial of a fundamen e addition is founded substan right to confront and cross-ex eir statements form the sole or p mere technicality but an integra ns of the Ld. CIT(A) based on DDIT(supra) regarding the burd obabilities also do not advance sent case, the assessee has con tion and has specifically sough ll as an opportunity to cros absence of any independen cash receipt signed by assess nds or recovery from the assess o have shifted merely on the ba ts. n that income-tax authorities ar e Indian Evidence Act, as relied e to Jay Engg. Works Ltd. and M iyanka Sandeep Runwal ntially on third- xamine adverse primary basis of al component of the decision in den of proof and the case of the nsistently denied ht the material ss-examine the nt corroborative see, delivery of see, the burden asis of untested re not bound by upon by the Ld. Metal Products of India (supra), is we dispense with the o justice. Material colle used only after af opportunity to rebut been satisfied in the p 7.18 The reliance pla to sustain the additi appear to be genui strong, cannot take t material directly lin purchase of jewellery conjectures drawn fro 7.19 With respect to is not absolute, ther abstract. However, t CIT(A), including Chhabra(supra) and materially different s in Andaman Timber where statements o statements are not su request, the resultin Pri ell settled. However, this prin obligation to follow the princi ected behind the back of the a ffording the assessee a fair the same. That essential requi present case. aced on ITC Classic Finance Ltd on on the ground that the tran ine is also misplaced. Suspic the place of proof. In the absenc nking the assessee with the y, the addition cannot be susta om the conduct of a third party. the finding that the right of cro re can be no quarrel with the he judicial authorities relied u Kanungo & Co.(supra), Telestar Travels Pvt. Ltd.(su statutory contexts. The Hon’ble Industries v. CCE (supra)has c of third parties are relied u ubjected to cross-examination d ng order stands vitiated. In th iyanka Sandeep Runwal d. v. DCIT(supra) nsaction did not cion, howsoever ce of any cogent e alleged cash ained merely on . oss-examination e proposition in upon by the Ld. Surjeet Singh upra), arose in Supreme Court clearly held that upon and such despite a specific he present case, prejudice to the ass rests almost entirely 7.20 The Ld. CIT(A) applying the presum Act against the as provisions operates possession the mat extended to a third p 7.21 In view of the upholding the additi the assessment proc statements and digita assessee nor teste unsupported by inde order, therefore, cann 7.22 In view of the fo of ₹56,00,000/- sust breach of the princip reliable and corrob therefore, cannot be s Pri essee is writ large, as the imp on such untested statements. also failed to address the le mption under sections 132(4A) a ssessee. The presumption u primarily against the perso erial is seized and cannot be arty without independent corrob above, we hold that the Ld. ion by overlooking the fundam ceedings. The addition is based al material which were neither f d by way of cross-examina ependent corroborative evidence not be sustained in law. foregoing discussion, we hold th tained by the Ld. CIT(A) is viti ples of natural justice and is u borative evidence. The impu sustained in law. iyanka Sandeep Runwal boration. CIT(A) erred in mental defects in d on third-party furnished to the ation, and are e. The impugned hat the addition iated by a clear unsupported by ugned addition,

23 Accordingly, the confirmed by the Ld assessee on merits ar 8. The remaining 2016-17 having iden grounds raised in tho 9. In the result, all allowed.