M/S. S.P.SAMDARIA ENTERPRISES,MUMBAI vs. THE ITO WD 19(3) (2) , MUMBAI

The appellant, M/s. S.P. Samdaria Enterprises (hereinafter referred to as ‘the assessee’) by filing the present appeal, sought to set aside the impugned order dated 24.09.2021 passed by the National Faceless Appeal Centre(NFAC) [Commissioner of Income Tax (Appeals), Delhi] (hereinafter referred to as CIT(A)] qua the assessment year 2010-11 on the grounds inter-alia that :- “1. On the facts and in law, learned CIT(Appeals) [NFAC], Delhi has erred in sustenance of addition of Rs.65,23,440/- made by the AO of purchases from Parshwanath Gems Pvt. Ltd., alleging that said 2 M/s. S.P. Samdaria Enterprises

Briefly stated facts necessary for adjudication of the issues at hand are : assessee is as firm engaged in the business of reseller and importer of diamonds and on the basis of search and survey operation carried out in case of Gautam Jain & others on 03.10.2013 by Directorate General of Income Tax (DGIT) (Investigation), Mumbai it was found that all name sake/dummy directors/partners/proprietors of various concerns belong to native place of Gautam Jain & family in Rajasthan and have either known as Gautam Jain personally or through their families. In their respective statements recorded they have admitted that they were made directors/partners and proprietors of various concerns at the direction of Gautam Jain & family which were in fact managed and controlled by Gautam Jain. From the details of hawala entities it has come on record that the assessee has obtained accommodation entries for purchase during the year under consideration from M/s. Parshwanath Gems Pvt. Ltd. to the tune of Rs.65,23,440/-.

Consequently, the Assessing Officer (AO) proceeded to reopen the assessment proceedings by initiating the proceedings under section 147/148 of the Income Tax Act, 1961 (for short ‘the Act’). Necessary notices under section 142(1) and 143(2) of the 3 M/s. S.P. Samdaria Enterprises Act were issued and in response to which one Ajit Kumar, partner of the firm attended the proceedings from time to time. Declining the contentions raised by the assessee that all his purchases are genuine and duly recorded in the books of account the AO proceeded to make addition of Rs.65,23,440/- in the net profit declared by the assessee under section 69C of the Act by framing assessment under section 143(3) read with section 147 of the Act.

Assessee carried the matter before the Ld. CIT(A) by way of filing appeal who has confirmed the addition by dismissing the appeal. Feeling aggrieved the assessee has come up before the Tribunal by way of filing present appeal.

We have heard the Ld. Authorised Representatives of the parties to the appeal, perused the orders passed by the Ld. Lower Revenue Authorities and documents available on record in the light of the facts and circumstances of the case and law applicable thereto.

Undisputedly, this case was reopened by the AO on the basis of information received from Directorate General of Income Tax (Investigation) [DGIT(Inv.)], Mumbai that assessee has obtained accommodation entries by showing the purchase of Rs.65,23,440/- from one M/s. Parshwanath Gems Pvt. Ltd. a hawala entity. It is also not in dispute that the assessment has been framed on the basis of statements of relatives and friends of one Gautam Jain. It is also not in dispute that during the appellate proceedings one Narendar Kumar V. Jain, director of M/s. Parshwanath Gems Pvt. Ltd. filed an affidavit stating therein that Gautam Jain did not have any 4 M/s. S.P. Samdaria Enterprises connection with his company which has been treated as self serving document by the Ld. CIT(A).

In the backdrop of the aforesaid facts and circumstances of the case the Ld. A.R. for the assessee contended that he has made genuine purchases from M/s. Parshwanath Gems Pvt. Ltd. who has no connection whatsoever with Gautam Jain and has brought on record confirmation on account of the assessee qua the entire purchases made from M/s. Parshwanath Gems Pvt. Ltd. available at page 50 of the paper book. The Ld. A.R. for the assessee also contended that the entire payment has been made by the assessee through banking channel/RTGS and through cheques as is evident from page 51, 53, 55 & 56 of the paper book. However, on the other hand, the Ld. D.R. for the Revenue relied upon the order passed by the AO as well as the Ld. CIT(A).

When we examine aforesaid contentions raised by the Ld. A.R. for the assessee in the light of the document referred to as discussed in the preceding para, it is proved on record that none of these documents has been examined neither by the AO nor by the Ld. CIT(A) rather they have passed order mechanically.

When we further examine para 4.3.1 at page 13 of impugned order passed by the Ld. CIT(A), the assessee has raised specific objection before the Ld. CIT(A) that statement being used against the assessee was never provided to him. It is also recorded in para 4.3.2 of the impugned order that assessee stated that “sufficient opportunity of being heard was not given to it” as is evident from para 4 of the assessment order. It is also recorded in para 4.3.3 that the assessee has alleged that supporting evidences produced were 5 M/s. S.P. Samdaria Enterprises not considered without any legal and valid ground. All these objections raised by the assessee go to prove that the entire addition has been made merely on the basis of information received from DGIT (Inv.), Mumbai and none of the statement of relatives and friends of Gautam Jain, who was allegedly controlling 17 such concerns for providing accommodation entries, has seen the light of the day nor such statements have been provided to the assessee during assessment proceedings nor the evidence viz. confirmation by Parshwanath Gems Pvt. Ltd. who claimed that he has no concern whatsoever with Gautam Jain, bank statements showing that the entire payment by the assessee to Parshwanath Gems Pvt. Ltd. was routed through banking channel have been examined by the AO as well as Ld. CIT(A).

Not only this, in para 4.3.1 of impugned order it is categorically recorded that “the Assessing Officer had noted that about 70 concenrs were controlled by the group. Those concerns were giving accommodation entries to hundreds of people. It will not at all be practical and feasible to provide the statements taken and give opportunities to cross examination to all beneficiaries. Therefore, the claim of assessee is not all tenable. The objections raised in ground nos.1 and 2 are therefore dismissed.” Even during the course of appellate proceedings the assessee tried to obtain the information under Right To Information Act (RTI), 2005 by inspecting entire records regarding reassessment proceedings demanded all the notices issued to the firm, proceeding sheets, notice under section 133(6), 133(1), copy of proforma for sanction under section 151 of the Act and also sought certified copies thereof but the same have not been provided. Then assessee filed 6 M/s. S.P. Samdaria Enterprises an appeal before appellate authority, Mumbai under RTI but failed to get any document.

In these circumstances, we are of the considered view that the entire assessment as well as appellate proceedings in this case are based upon surmises and botched up investigation made on by the AO and as such not sustainable in the eyes of law. To impart justice and to provide an adequate opportunity of being heard to the assessee the case is required to be remanded back to the AO who shall supply all the statements alleged in the reasons recorded as well as assessment order and to supply other documents referred to in the assessment order and to provide opportunity to the assessee to cross examine the witnesses whose statements have been relied upon to fasten the liability of the assessee.

Consequently, appeal filed by the assessee is allowed for statistical purposes.