AMIT VIRENDRA PATEL,MUMBAI vs. ITO 19(1)(1), MUMBAI

The assessee also raised the following addition grounds:

The additional grounds raised are pure legal issue, which does not require investigation of new facts. Hence, placing reliance on the judgment of the Hon’ble Apex Court in the case of National Thermal Power Co. Ltd. v. CIT (1998) 229 ITR 383 (SC), we admit the additional grounds.

The assessee is an individual and filed the return of income for AY 2012-13 on 30.09.2012 declaring total income of Rs. 11,85,751/-. The return was processed u/s. 143(1) of the Act. The AO received an information from DDIT (Inv.) based on the search and seizure action conducted on Rajendra Jain group that the assessee has been one of the beneficiary of the accommodation entries towards purchasers from the entry provider M/s Maya for an amount of Rs. 72,35,035/-. In view of the same the AO reopened the assessment by issuing notice u/s. 148 of the Act in response to which the assessee filed the return of income on 20.03.2019. The assessee requested for the reason recorded which was provided to the assessee vide letter dated 12.09.2019. The assessee filed its objections vide letter dated 09.10.2019 and the AO disposed of the objections vide order dated 29.10.2019. Subsequently, the AO called on the assessee to furnish details pertaining to the impugned transaction. The assessee furnished details of purchase and sells invoices, ledger copy, etc. to substantiate the claim that the purchasers made are genuine. However, the AO did not accept the submissions of the assessee and as addition u/s. 69C of the Act. Aggrieved the assessee filed further appeal before the CIT(A). The CIT(A) dismissed the appeal of the assessee to confirm the addition made by the AO. The assessee is in appeal before the Tribunal against the order of the CIT(A).

The ld. AR during the course of hearing made detailed submissions with regard to the legal contentions raised through addition ground as well as the main grounds. The ld. AR also made submissions contending the additions on merits. For the purpose of adjudication we will first consider the submissions made on merits. The ld. AR submitted that the assessee has furnished all the details pertaining to the impugned transactions such as the ledger copy, invoice raised by M/s. Maya Impex, the corresponding export sales invoice raised on M/s World Impex and the stock statement, etc. (page 35 to 40 of PB). The ld. AR also drew our attention to the letter submitted by the assessee before the AO requesting to summon the party for cross-examination. The ld. AR argued that the AO while making the impugned transaction as bogus has completely relied on the findings in a third party search and the statements recorded therein. The ld. AR further argued that the AO did not conduct any independent inquiry with regard to the transactions and has not examined the various documentary evidences submitted by the assessee. The ld. AR accordingly argued that the addition made by the AO is merely based on conjecture and surmises without recording any adverse finding pertaining to the assessee. Accordingly, the ld. AR submitted that the addition made by the AO cannot sustain on merits. 6. The ld. DR on the other hand submitted that the AO has received information based on the findings of the Investigation Wing that the party with whom the assessee has entered into purchase transaction is a bogus entity and accordingly the AO has rightly treated the entire transaction as non-genuine. The ld. DR further submitted that the documents furnished by the assessee cannot be independently accepted and has to be considered along with the findings of the Investigation Wing. The ld. DR also submitted that the AO has applied his mind and has come to the conclusion that the transactions entered into by the assessee which is established to be a bogus entity is non-genuine. The ld. DR relied on the decision of the Hon'ble Bombay High Court in the case of PCIT vs. Kanak Impex (India) Ltd. [2025] 172 taxmann.com 283 (Bom.).

The ld. AR in rebuttal submitted that the entire premise under which the Hon'ble Bombay High Court concluded that the transaction was bogus was that the assessee in the said case has not furnished any details and has not discharged the onus of proving the genuineness of the transaction by filing the relevant documents. The ld. AR submitted that the assessee's case is clearly distinguishable since the assessee has furnished the relevant details before the AO and no adverse finding has been recorded by the AO on the merits. Accordingly, the ld. AR submitted that the reliance placed by the ld. DR on the decision of the Juri ictional High Court is misplaced.

We heard the parties and perused the material on record. The assessee's case was reopened based on the information received from DGIT (Inv.) as a result of search and seizure operation conducted in the case of a third party Shri Rajendra Jain and family. From the perusal of the order of the AO we notice that the AO has elaborated the various findings of the Investigation Wing as a result of the search and seizure operations and the statements recorded from Shri Rajendra Jain. We further notice that the AO while doing so has not examined the documentary evidences submitted by the assessee in terms of purchases, corresponding sales, the stock statement, etc. We also notice that the AO recorded a finding with regard to the documentary evidences that the entries in the books of accounts are unilateral act and cannot be relied on in the light of the findings of the Investigation Wing. In our considered view such a conclusion arrived at by the AO is not tenable for the reason that the impugned transaction cannot be treated as non-genuine merely based on third party search/statements without recording any adverse finding with regard to the documentary evidences submitted by the assessee or without recording anything which contrary to the submissions made by the assessee. We notice that the assessee has purchased cut and polished diamonds weighing 224.83 cts. from Mayank Impex on 21.11.2011 for a consideration of Rs. 72,35,051/- and has made payment through banking channel to the tune of Rs. 8,00,000/- against the said purchase (page 35 & 36 of PB). We further notice that the assessee has exported the said diamonds to M/s World Impex, Hongkong through export invoice for U 149,262.78 (page 37 of PB). We also notice that the stock statement of the assessee for the year ended 31.03.2012 reflect the impugned transaction of purchases and sales (page 38 to 40 of PB). From the perusal of these facts we are of the view that the assessee has discharged the onus of proving the genuineness of the transaction. Accordingly, we are of the view that the lower authorities are not correct in treating the impugned transaction as bogus merely based on third party search/statements without examining the documentary evidences and without recording any corroborative evidence in support of the information from the Investigation Wing in assessee's case. Therefore we hold that the addition made by the AO is liable to be deleted and the AO is directed accordingly. 9. Since we have deleted the addition considering issue based on the merits, the legal contentions of the assessee raised through additional as well as the main grounds have become academic and left open accordingly.

In result, the appeal of the assessee is allowed.