BHANWARLAL M. JAIN,MUMBAI vs. DCIT- CC- 1(3), MUMBAI

4 Shri Bhanwarlal M. Jain Assessment Years: 2007-08 to 2014-15 1.5 The grounds taken by the assessee read as under: -

1. 1. The learned CIT(A) has erred on facts and in law in not holding that the assessment order passed by the Assessing Officer u/s.153A r.w.s. 143(3) of the Act was bad in law and was also in violation of principles of natural justice.

2. The learned CIT(A) has erred in law and on facts in holding that the income arising out of the sales and purchases transactions of 70 entities, listed on pages 80 to 83 of the impugned order of the CIT(A) [hereinafter referred to as "the said 70 entities"], belong to and should be assessed in the hands of the appellant.

3. The learned CIT(A) has erred in law and on facts in determining unaccounted commission income of the appellant at Rs.4,44,66,591 as follows: Sr.no. Particulars Amount (Rs.)

1. Alleged Commission @0.02% on account import 18,87,809 purchases 2. Alleged Commission @0.02% on account local 27,63,571 purchases 3. Alleged commission income @2.4% of alleged 2,26,23,851 accommodation entries of loans and advances. 4. Alleged commission income @ 0.075% on 1,71,91,360 alleged bogus sales bills Gross unaccounted commission 4,44,66,591

4. On the facts and circumstances of the case as well as in law, the learned CIT (A) has erred in enhancing the appellant income on account of alleged commission income on local purchase, without considering the facts and circumstances of the case.

5. The learned CIT (A) has erred in law and on facts in holding that the data found in the 4 GB white colour sony pen drive, allegedly seized by the Income Tax Department, belong to the appellant. 6. The learned CIT(A) has erred in law and on facts in relying on the confessional statements of various persons without granting any opportunity to the appellant to cross examine them. 7. The learned CIT(A) has erred in law and on facts in holding that the retractions made by the appellant and the other persons are merely "after thought" without appreciating the true facts and circumstances of the case. 8. The learned CIT(A) has erred in law and on facts by estimating the income of the appellant without rejecting the books of accounts maintained by the appellant. 9. The learned CIT(A) has erred in law and on facts in allowing deduction meagerly @ 25% towards expenses against gross unaccounted commission income computed as per the appellate order. 10. The learned CIT(A) has erred in not directing the Assessing Officer to give credit to the appellant for the income disclosed in the returns of the income of the 5 Shri Bhanwarlal M. Jain Assessment Years: 2007-08 to 2014-15 said 70 entities and to grant credit for TDS/taxes paid by the said 70 entities while computing the income and tax liability of the appellant. 11. The learned CIT(A) has erred in law and on facts in not directing the Assessing Officer to ignore the income disclosed in the return of the income of the appellant. 12. The order passed by the learned CIT(A) is bad in law and is in violation of the principles of natural justice.”

1.6 The grounds taken by the revenue read as under: - 1. "On the facts and circumstances of the case and in law, the Ld. CIT (A), has erred in directing the Assessing Officer to adopt 0.02% of the transactions/entries as unaccounted commission, as against 0.275% adopted by the Assessing Officer, which is based on the admission and averment by the assessee and his associates in their statements during the course of action u/s. 132(1) of the Income Tax Act, 1961." 2. "On the facts and circumstances of the case and in law, the Ld. CIT (A), Mumbai, has erred in directing the Assessing Officer to take a percentage of 0.02% on import purchases, equating it with local purchases; without appreciating the fact that import purchases involve lot of documentation and vetting by Government Authorities, for which the percentage of commission would be much higher than the local purchases." 3. "On the facts and circumstances of the case and in law, the Ld. CIT (A), Mumbai, has erred in directing that the expenditure on earning such commission from accommodation transactions be taken @ 25% of such commission amount, as against 10% held by the Assessing Officer, without recording any fault in the finding of the Assessing Officer, and without bringing any material evidence to support such additional relief given."

4. The appellant prays that the order of the CIT(Appeals) on the above grounds be set aside and that of the AO be restored. As evident, the sole subject matter of cross-appeals is estimated commission income. The assessee has also taken legal grounds. Proceedings before Ld. Assessing Officer 2.1 Facts as emanating from case record of AY 2008-09 are that the assessee being resident individual is stated to be engaged in the business of import, export and trading of cut & polished and rough diamonds. It filed its return of income for the year under consideration at Rs.3.89 Lacs. However, the assessee group was subjected to Search & Seizure Action u/s 132 on 03/10/2013. The Warrant No. 9646 covered the case of the assessee & his two sons namely Shri Rajesh B. Jain and 6 Shri Bhanwarlal M. Jain Assessment Years: 2007-08 to 2014-15 Shri Manish B. Jain. Based on the findings of search action, assessment was framed u/s 143(3) r.w.s. 153A wherein the assessee was saddled with additions of Rs.591.95 Lacs vide order dated 21/03/2016. This addition is the sole subject matter of dispute before us. 2.2 During assessment proceedings, in the background of search action, a final-show cause notice was issued by Ld. AO to the assessee on 16/02/2016 in which it was alleged that the assessee along with his son was operating and managing 70 benami concerns including benami concerns in the name of its various employees and associates. Through these entities, the assessee group imported diamond on behalf of others and provided accommodation entries of unsecured loans, bogus purchase to various beneficiaries. The attention was drawn to numerous loose papers (referred to as ‘estimate sheets’) containing hand written accounts as found during search operations. These sheets were seized as per various annexures and stated to be already confronted to the assessee during search as well as during the course of assessment proceedings. Similar hand written sheets containing cash accounts were stated to be found from assessee’s premises. Further, a white color 4GB pen drive (Pen drive) containing names of the beneficiaries who availed such accommodation entries was also found / seized from the assessee’s residence. The pen drive contained calendar-year wise names of the beneficiaries, the amount of cash, the details of brokerage / commission etc. The password of the pen drive was stated to be cracked with the help of software programmers which enabled the department to view the contents of the same. The pen drive also contained complete details of Angadiya Account maintained since 2004 in electronic form.

7 Shri Bhanwarlal M. Jain Assessment Years: 2007-08 to 2014-15 The parallel account maintained on the pen drive pertained to various concerns being managed and controlled by the assessee group. Upon comparison of print-outs generated after decryption of data on pen-drive and correlating the same with other data gathered during questioning of assessee’s various employees namely Lunkaran Kothari, Anil Kicha, Ritesh Siroya, Rohit Birawat & Basant D. Jain, it was noted that the data was identical. All employees admitted in their respective statements that parallel cash accounts were maintained wherein the cheques entered were tallied with cash receipts to offer accommodation entries to various beneficiaries. On comparison of hand written sheets as well as accounts maintained on the pen-drive, the same were noted to be identical. The sheets were in the handwriting of assessee’s brother-in-law as well as his son as admitted during the course of search. All these facts conclusively proved that daily accounts were first written manually on estimate sheets and subsequently the data was entered into the pen- drive. Since the assessee, in statement on oath u/s 132(4), admitted commission of 2 paisa per Rs.100 transaction, it was proposed to bring the same to tax. 2.3 However, the assessee submitted that he was operating and managing only 9 entities and not the other entities as alleged in the notice. The assessee asserted that the statement given u/s 132(4) was without consent, not voluntary & taken by Investigation wing by using threat and coercion. The statements were stated to be given in confused state of mind. Accordingly, retraction was filed vide affidavit dated 15/03/2014. The assessee denied having any business connection with any of the so-called employees / associates. The assessee also denied 8 Shri Bhanwarlal M. Jain Assessment Years: 2007-08 to 2014-15 the ownership of pen-drive by submitting that the same was not found from residential premises but planted from outside. The stated fact were sought to be fortified by submitting that the seizure of the pen-drive was shown after almost 6 days i.e. on 08/10/2013 which could have been seized or inventorized on 04/10/2013 along with the inventory made for credit cards, bank account and jewellery etc. Further, the seizure of pen drive was not made the part of Panchnama annexure, officially drawn on 04/10/2013 and the admission about the same from his son Shri Rajesh Jain was recorded forcibly. In the above background, the assessee denied indulging in the activity of providing any accommodation bills, loans entries to other parties and opposed the proposed additions. 2.4 However, each and every objection as well as allegations leveled by the assessee in its reply dated 24/02/2016 was specifically dealt with by Ld. AO in the assessment order. It was observed that the statements were recorded in the presence of independent witnesses; the assessee had gone through the statements and understood the contents of the same as explained to him by his son Shri Manish Jain as well as his employee Shri Basant Jain who were present at that time of point. The copies of all the seized material were supplied to the assessee by the investigation wing immediately after the search but the assessee deliberately did not furnish any explanation on the incriminating material pertaining to parallel books of accounts maintained on the pen drive as well as on hand written cash sheets. In fact, the assessee remained absent during search proceedings for first 3 days of the search and the attitude of the assessee was complete non-cooperation. The summons was not complied with and no explanation was furnished on incriminating 9 Shri Bhanwarlal M. Jain Assessment Years: 2007-08 to 2014-15 material found during the search. The stand of the assessee was found to be misleading as well as contradictory since the assessee was aware of the activities of all the dummy directors / partners but on the other hand, he was demanding copies of their statements and opportunity of cross examination. The details of owners of the residential premises in which the dummy directors / partners / proprietors of benami concerns were residing have been extracted on page 11 of the assessment order. The perusal of the same would reveal that these residential premises were owned primarily by the assessee group in different names / entities. In reply to question nos.31 & 32 of the statement, Shri Rajesh B. Jain categorically admitted about finding and consequent seizure of the pen- drive. No such comments were made by the Panchas that the said incriminating material was not found from the residential premises. Importantly, if the pen drive was planted by the search team, then how come the identical data was found in the other pen drive seized from one of his employee Shri Rohit Birawat who was apprehended while attempting to flee to Rajasthan with the crucial data on pen-drive? 2.5 So far as the factual matrix was concerned, market information as available with investigation wing, Mumbai revealed that Shri Bhanwarlal Jain and his son Shri Rajesh B. Jain managed, controlled and operated numerous concerns in the names of various persons who were shown as name-sake directors, partners and proprietors of these entities. Through these entities, the group provided accommodation entries of loans and advances and sales to various parties / beneficiaries against certain commission. The inquiry revealed common features of these concerns having similar business traits like 10 Shri Bhanwarlal M. Jain Assessment Years: 2007-08 to 2014-15 high turnover, assets in the shape of loans & advances, debtors with matching creditors and no payment of taxes. After collating the data from different agencies like customs department, Bharat Diamonds Bourses, these entities were identified and arranged in a group based on similar parameter like common address, directors etc. The various entities of Shri Bhanwarlal Jain were found to be having similar characteristics / features as noted above. The same led to search proceedings on the assessee on 03/10/2013 wherein incriminating documents like hand written sheets containing parallel accounts, identical data in various computer systems at undisclosed offices of the assessee with similar data on pen drives of the employees who were caught and apprehended by the investigating team and a white color pen-drive containing calendar year-wise parallel accounts in financial accounting software seized at assessee’s residence, was found and seized. 2.6 Shri Bhanwarlal Jain, in statement on oath u/s 132(4), categorically admitted about his engagement in providing accommodation entries through 70 benami concerns. Similar statements were recorded from all employees wherein they admitted that they assisted / abetted Shri Bhanwarlal Jain in the business of providing accommodation entries. They also admitted that all these concerns were actually controlled and managed by Shri Bhanwarlal Jain and his son Shri Rajesh Bhanwarlal Jain and they were mere dummy directors / partners / proprietors in various concerns. 2.7 It was further noted that the pen-drive as well as loose sheets were found and seized from assessee’s residential premises and this fact was duly admitted by the assessee as well as his son in statement 11 Shri Bhanwarlal M. Jain Assessment Years: 2007-08 to 2014-15 on oath u/s 132(4). The complete correlation was established between the parallel books of accounts found on the white color 4GB pen drive with the regular books of accounts of the 70 concerns managed and operated by the assessee. 2.8 Proceeding further, during the course of search on the basis of enquiries conducted on employees of Shri Bhanwarlal Jain and family, new premises were discovered at (i) 16, Mohan Building, JSS Road, Girgaum, Mumbai; (ii) Plot No.233, GF, Navkar House, Vitthal Bhai Patel Road, Girgaon, Mumbai; (iii) 210, JSS Road, Kalewadi Corner, Girgaon, Mumbai. These premises were secret premises which were not disclosed to any government agencies with a view to carry out the aforesaid suspicious activities. The books of half of the concerns were stated to be maintained at premises no. (i) whereas the books of the other half concerns were stated to be maintained at premises no. (ii). Numerous documents in the shape of PAN and other identification proof of name-sake directors / partners / proprietors along with old stamp papers, blank signed cheque books were found and seized from these premises. 2.9 Shri Basant D Jain, a most trusted employee of the assessee, who worked in these back-offices, was examined on oath in which he admitted that bank transactions of all the companies was being done from these offices and the directors etc. of the concerns would come and sign the cheque books as per the direction of Shri Bhanwarlal Jain. Another significant feature noted by Ld. AO was that the books of account of all these concerns were being maintained in one register and 12 Shri Bhanwarlal M. Jain Assessment Years: 2007-08 to 2014-15 on one computer only. The books of accounts of most of the concerns were audited by common auditor. 2.10 During the course of search, many instances were reported by the search team which indicated that there was an attempt by the assessee to destroy the parallel accounts / incriminating material. In one such instances, the search team apprehended an employee namely Rohit Birawat at CST Terminus, Mumbai when he was attempting to flee from Mumbai to Rajasthan with incriminating material. Three pen drives were found from his possession. The data in pen drive was found to be similar to data found in the pen drive found and seized from assessee’s premises. 2.11 Proceeding further, modus operandi of providing accommodation entries was elaborately discussed by Ld. AO in para 4.6. The said modus operandi was duly admitted by the employee-cum- namesake directors / partners / proprietors of Shri Bhanwarlal Jain Group in their respective statements. The relevant extract of the same has already been reproduced as well as noted by Ld.AO in the assessment order. All these persons made categorical admission of the fact that all the entities were being managed and controlled by Shri Bhanwarlal Jain group and they were merely acting as name-sake or dummy directors / partners / proprietors in these entities against salary. 2.12 In fact, the assessee, himself, in statement recorded u/s 132(4) on 11/10/2013 at 16, Mohan Building, JSS Road, Girgaum, Mumbai categorically admitted that he was controlling the overall business of all such concerns. The details of all these entities have 13 Shri Bhanwarlal M. Jain Assessment Years: 2007-08 to 2014-15 already been enumerated in the statement and the same has also been extracted in the assessment order. 2.13 A survey u/s 133A was also conducted at DC-3060/DC-3050, Bharat Diamond House, BKC Bandra, (E), Mumbai in the case of M/s Ratan & Co. and M/s Mamta Gems. The statement of Shri Rajesh Bhanwarlal Jain was recorded therein. It transpired that these two entities were run by Shri Rajesh B. Jain and her mother. Several rubber stamps and declaration papers ready for delivery of import parcel of about 30 different concerns were found. Similarly, blank letter heads of 31 different concerns were found at the time of survey. It was admitted that the blank letter heads were utilized for early release of parcel from customs relating to these 30 concerns which led to conclusion that these concerns were operating from same premises. 2.14 A white colored 4 GB pen drive was found from assessee’s premises. It contained calendar year-wise accounts on financial accounting software. Shri Rajesh Bhanwarlal Jain made admission of the fact that the pen drive was found from the residential premises at 171, Silver Arch Apartment, Petit Hall Compound, Nepean Sea Road, Mumbai. The said fact was also admitted by Shri Bhanwarlal Jain in statement on oath u/s 132(4) on 11/10/2013. It was also admitted that the entries in the estimate sheets were same / identical to those found in the white colored Sony 4GB pen drive. The estimate sheets were in the nature of square-off transactions wherein cash received from one party was paid back to another party through Angaria Account as per the market practice against issue of cheque in the name of the said party. Such transactions were not recorded in the books of accounts of the 14 Shri Bhanwarlal M. Jain Assessment Years: 2007-08 to 2014-15 benami concerns being managed and controlled by him. In response to question no. 34, Shri Bhanwarlal Jain confirmed of going through the entire excel print outs of parallel accounts maintained in the above- mentioned pen-drive. He also confirmed that the transactions recorded in the said document pertained to business activities of benami concerns managed and controlled by him. 2.15 At para 4.13 of the order, it was noted by Ld. AO that the conduct of the assessee was immensely non-cooperative and he tried to derail the process of investigation. So much so, the assessee remained absent from his residence in the first 3 days since the commencement of search on 03/10/2013 and deliberately avoided coming back to his residential premises thereby showing complete non-cooperation with the Income Tax Authorities. Even after coming back, he did not cooperate and kept evading the questions. 2.16 On the basis of aforesaid facts, following conclusions were drawn by Ld. AO in para 4.14 of the order: - • Lunkaran Parasmal Kothari, Anil Khicha, Rajesh Chopra, Ritesh Sfroya, Rohit Birawat, Basant D Jain, Shreyansh L Jain, Vivek Noratmal Jain,Mahavir Mangalchand Jain, Ramniwas Choyal, Gautam Kumot, Rajesh Chopraf Atul Laddha are dummy directors, partners and proprietors. • They have been made name sake director, partner and proprietor at the direction and instruction of Bhanwarlal Jain, Rajesh B, Jain are merely their employees who receive salary mostly in cash from them which is more or less equivalent to the profit shown in the concerns in which they are dummy director/partner/proprietor. • All such dummy directors, partners and proprietors belong to Rajasthan and have been known to and working for Bhanwarlal Jain for many years and they reside in residences which are in the names of Bhanwarlal Jain, Rajesh Jain and their family members or the concerns in which Bhanwarlal Jain, Rajesh .Jain and their family members are directors, partners and proprietors. • All such concerns in which these persons are shown as directors, partners and proprietors operate from the premises owned by Bhanwarlal Jain and his family members or the concerns in which Bhanwarlal Jain, Rajesh B. Jain and their family members are directors, partners and proprietors.

15 Shri Bhanwarlal M. Jain Assessment Years: 2007-08 to 2014-15 • Since they are employee of Bhanwarlal Jain , they have superficial knowledge about business activity of the concerns but no in-in-depth knowledge of the same. • In many of the cases, their wives are also shown as employees of Bhanwarlal Jain and Rajesh Jain and draw salary from various concerns managed and controlled by Bhanwarlal Jain & his family without rendering any service. • All the dummy directors/partners/proprietors sign blank cheques and hand them over to Bhanwarlal Jain and Rajesh B.Jain. • The books of accounts and bank accounts of all such concerns are maintained at the direction of Bhanwarlal Jain and Rajesh B Jain. • The books of accounts of all the concerns, blank signed cheques, old stamp papers etc were found together at one place- Plot No 233, Ground Floor, Navkar House, Vitthal Bhai Patel Road, Girgaum (Near Prarthana Samaj, VP Road), Mumbai-O4 and 16 Mohan Building, JSS Road, Khandawadi Police Station, Girgaum, Mumbai - the 2 back offices discovered during search. • Documents were found containing the name of various such concerns including those who are shown as their directors, partners and proprietors, their PANs, bank nos of the said concerns and the opening balances in the same. It proves that the names of the concerns and persons appearing in such sheets are managed and controlled by one person/ family. • Anil Mandawat who audits 44 of these concerns has stated that the books of accounts of the said concerns are audited on the direction of Lunkaran Parasmal Kothari who is an employee of Bhanwarlal Jain. CA has admitted that he merely puts his signatures on the audit reports of these concerns without verifying their books of accounts. This further proves that the affairs of these concerns are managed and controlled by Bhanwarlal Jain. • Bhanwarlal Jain has also admitted that all the concerns (totaling to 70) in the names of various persons are actually controlled and managed by him. 2.17 The affidavit of retraction as filed by the assessee on 27/05/2014 i.e., almost after 8 months of the commencement of search was held to be mere after-thought and a tutored statement. Similar retraction affidavits as filed by other associates-cum-employees were held to be nothing but planned move in tandem to thwart the process of investigation. Glaring contradictions as well as similarities were found in the retraction affidavits. The said retraction, in the light of overwhelming / clinching evidences as found during the course of search action as well as in the light of various judicial precedents, was rejected since the same was termed as nothing but well-planned device to frustrate the efforts of the department to unearth unaccounted income.

16 Shri Bhanwarlal M. Jain Assessment Years: 2007-08 to 2014-15 2.18 After deciphering the accounts of these concerns, it transpired that the assessee made import in the name of benami concerns on behalf of real importers. The imported goods were handed over to the real importers against cash. The fictitious stock standing in the books was transferred by issuing bogus purchase bills against receipt of cheque / RTGS. This cheque transaction would be reflected in the regular books. The cheque / RTGS would be used to make payment to the parties from whom imports were made. Against the cheque so received against issuance of purchase bills, the parties would be returned equivalent cash which would be received from real importers. It would also be sourced from builders who generate cash on account of receipt of on-money on sale of flats. The cheque received by the benami entities would also be used to advance accommodation entry of loans/ advances to builders or other persons desirous of taking such cheque entry. Reversal of loan entry takes place when cheque is returned back by the beneficiary against receipt of cash. In effect, the assessee group provided three types of accommodation entries viz. (i) Accommodation entry for loans and advances; (ii) Accommodation entry for bogus purchases; (iii) Imports made on behalf of real importers. 2.19 Finally, in the backdrop of aforesaid facts, the following conclusions were drawn at para-6 of the order: - * That the assessee is operating and managing 70 concerns in the names of dummy directors, partners and proprietors. All such dummy directors, partners and proprietors have admitted in their respective statements that they are actually employees of the assessee and the later manages and controls the business of the respective concerns. * That the books of account of all the concerns in which the assessee is admittedly a director, partner and proprietor were found from 16 Mohan building, JSS Road, Girgaum Mumbai, along with the books of accounts of other concerns which are managed and controlled by the assessee.

17 Shri Bhanwarlal M. Jain Assessment Years: 2007-08 to 2014-15 * That It has also been accepted by the assessee in his statement recorded under section 132 that the books of accounts are maintained in 16 Mohan building, 3SS Road, and 210 JSS Road, Girgaum, Mumbai. Since the entire business is looked after by the assessee assisted by his son Rajesh B Jain, therefore the assessee was taken to the actual business premise where the books of account were found so that the same could be confronted to him. * That the pen drive and the loose sheet contain the parallel books of accounts of the assessee. The pen drive contains details of the concerns in which the assessee is admittedly a partner director and proprietor. * That the department has also established correlation between the parallel accounts maintained on the pen drive and the regular books of accounts of concerns managed and controlled by the assessee. * That the manner in which the accommodation entry is provided by the assessee i.e the movement of cash against cheque and vice versa. * That the department maintains that the assessee through his various concerns genuinely imports diamonds but they are issued to the real importers out of books and accommodation entries of bogus purchases and loans and advances are issued through a complex web of transactions including banks and angarias against this bogus stock standing in the books of the concerns managed and controlled by the assessee. * That during search from the back office of the assessee registers were seized which maintain the details pertaining to real importers to whom imported diamonds are issued out of books. * That the entire modus operandi employed by the assessee of providing accommodation entry was admitted by the important employees of the assessee including Lunkaran Parasmal Kothari. In view of the facts discussed above and the circumstances and other overwhelming corroborative evidences, it is conclusively established and proved beyond doubt that the assessee is managing and controlling these 70 benami entities as also admitted by him in the statements recorded u/s.132(4) during the course of search.

2.20 Armed with these findings, Ld. AO proceeded to estimate the commission earned by the assessee through all these entities by carrying out these transactions. After considering material on record, estimate sheets and statements made during the course of search proceedings, the said estimation was made in the following manner: - No. Nature of Transaction Estimated Rate 1. Import transactions by assessee 27.5 paisa per rupees 100 or on behalf of others 0.275% 2. Accommodation entries of bogus 7.5 paisa per rupees 100 or purchases provided by assessee 0.075% 18 Shri Bhanwarlal M. Jain Assessment Years: 2007-08 to 2014-15 3. Bogus Unsecured Loans provided 20 paisa per rupees 100 per by assessee month or 0.20% per month or 2.40% per annum The commission so earned was to be reduced by 10% since the assessee would have incurred certain expenses like stationery, conveyance, office expenses, rent etc. while earning the aforesaid undisclosed income. The addition so estimated for the year under consideration aggregated to Rs.657.72 Lacs. After providing allowance of 10%, the net commission thus worked out to be Rs.591.95 Lacs which was added to the returned income of Rs.3.89 Lacs to arrive at total income of Rs.595.84 Lacs. Appellate Proceedings before Ld. CIT(A) 3.1 Aggrieved, the assessee contested the stand of Ld.AO by way of written submissions which have already been extracted in para no.12 of the impugned order. In the said submissions, the assessee, inter-alia, denied the ownership of the pen-drive and alleged that it was brought from outside and planted at assessee’s premises at the fag-end of inordinately extended search operation. The assessee also controverted the confessional statements made during the course of search proceedings. The additions made by Ld.AO were assailed from different angles. 3.2 Keeping in view the assessee’s submissions, a remand report was sought from Ld. AO during the course of appellate proceedings. It was reiterated by Ld. AO that innumerable papers in the shape of estimate sheets containing hand written accounts were found and seized. A white color 4GB Sony pen drive containing the name of the 19 Shri Bhanwarlal M. Jain Assessment Years: 2007-08 to 2014-15 beneficiaries who availed accommodation entries was found / seized from assessee’s residence containing calendar year-wise name of the beneficiaries, the amount of cash, the detail of brokerage / commission etc. The pen drive was password protected which was cracked with the help of professional software programmers which enabled the department to view the contents therein. The pen drive contained complete details of Angaria Account maintained by the assessee and his family since 2004 in electronic form. The print-outs of the cash account were also submitted along with the remand report. After correlating the print out with hand written sheets, it was found that the data was identical. These sheets were in the handwriting of Shri Lunkaran Kothari and Shri Rajesh Jain as admitted by them in statement u/s 132(4). These facts would conclusively prove that the estimates sheets were first written manually and subsequently entered into the pen drive. The percentage as estimated was stated to be based on admission made in the statement u/s 132(4) as well as on the basis of hand written estimation sheets found and seized. The remand report was duly confronted to the assessee which was again disputed by the assessee. Finally, all this material was duly considered by Ld. CIT(A) during the appellate proceedings. The incriminating material including hand written estimation sheets as well as print outs taken from the pen-drive was also appreciated. 3.3 The various facets of the case as elaborated by Ld. AO including statements made during the course of search action were taken note-of in paras 18 to 43 of the impugned order and following conclusions were ultimately drawn in the impugned order: - 20 Shri Bhanwarlal M. Jain Assessment Years: 2007-08 to 2014-15 1. The 70 group concerns managed and controlled by the Appellant are not engaged in any genuine business of diamond trading.

7. The books of accounts and bank accounts of all such concerns are maintained on the direction of the Appellant in a centralized manner.

8. The books of accounts of the group concerns, blank signed cheques, old stamp papers etc. were found at the secret premises found during the course of search operation, which were not disclosed to any Govt. Department.

9. Shri Anil Mandawat, C.A. has audited 44 of the group concerns. He has admitted that the books of accounts of the said concerns are audited on the direction of Lunkaran Parasmal Kothari. Further, he has admitted that he merely puts his signatures on the audit reports of these concerns, without verifying their books of accounts.

10. There is a confessional statement of the Appellant that all the 70 group concerns in the name of various persons, are actually controlled and managed by him.

11. The various employees / associates / directors / partners like Shri Lunkaran Parasmal Kothari, Shri Anil Khicha, Shri Rajesh Chopra, Shri Ritesh Siroya, Shri Rohit Birawat, Shri Basant D Jain, Shri Shreyansh L Jain, Shri Vivek Noratmal Jain, Shri Mahavir Mangalchand Jain, Shri Ramniwas Choyal, Shri Gautam Kumot, Shri Rajesh Chopra, Shri Atul Laddha has made confessional statements that they are just dummy and the various group concerns are actually run by the Appellant. They have clearly stated that they work as per the direction and instructions of the appellant and have no say in the actual working of the various group concerns.

12. These dummy directors /partners /proprietors gets remunerated by the Appellant for the services rendered. Almost all of them belong to Rajasthan and are well known to the appellant. Further, they reside in residences, whose ownership is with the appellant or his family members.

15. The appellant has contended that the loose papers and 4GB pendrive seized from his residence was shown to him for the first time only on 08/10/2013 and he was 21 Shri Bhanwarlal M. Jain Assessment Years: 2007-08 to 2014-15 forcibly asked to sign the inventory of the same. This contention is factually incorrect due to the fact that the appellant himself has admitted in the statement recorded u/s 132(4) on 08/10/2013 that he has deliberately stayed away from the Income Tax proceedings against him.

16. Shri Rajesh B. Jain, son of the appellant has very categorically confirmed in his statement u/s 132 (4) on 07/10/2015 at his residence at 171 Silver Arch, Nepean Sea Road, about the finding and consequent seizure of the said pen drive 17. The overwhelming incriminating data like register of real importer were also found and seized during the course of the search operation.

18. During the course of the search operation, clinching evidence were found in the form of "estimate sheets" & pen drive data. Both these seized documents / electronic data contains details of the accommodation entries, commission charged, movement of cash, angadia accounts, accounted banking entries against which cash has been transacted etc. 3.4 In the above background, Ld. CIT(A) proceeded to examine and verify the quantification of unaccounted commission. The same was finally done as under: - (i) Commission income on imported purchases The Ld. AO has estimated this commission as 27.5 paisa per rupees 100 transaction of import. The same was as per the statement of Shri Lunkaran Parasmal Kothari who stated that the real importers pay up commission varying between 25-30 paisa per rupees 100 of the total import. However, this estimate was on the basis of statements of just few parties whereas the other parties were not examined or if examined, they had nothing to say about the percentage of commission. On the contrary, the assessee himself had admitted to be charging commission @0.02% on the transactions done in 70 concerns. Therefore, due weightage was to be given to confessional statement of the assessee over the other statements made by dummy directors / partners /proprietors. The same also stood corroborated by relevant entries made in the estimation sheets which have also been illustrated in the impugned order. Accordingly, Ld. AO was directed to apply rate of 2 paisa per rupees 100 22 Shri Bhanwarlal M. Jain Assessment Years: 2007-08 to 2014-15 or 0.02% on imported purchases. Accordingly, partial relief was granted to the assessee under this head. (ii) Commission income on Bogus unsecured loans The Ld. AO has estimated this commission as 2.4% per annum. The computations made from the data extracted from pen drive corroborated the same and accordingly, this estimation made by Ld. AO was held to be justified. (iii) Commission income on Accommodation entries of Local Purchases The AO had not made any such addition on account of local purchases made by the assessee from registered dealers. However, Ld. CIT(A) opined that as per the findings that assessee earned commission on all dealings, the commission on these transactions was also to be estimated and added to the income of the assessee. Accordingly, enhancement notice was issued to the assessee which was disputed by the assessee. Finally, rejecting assessee’s submissions, it was observed that if all the sales of the group were held as accommodation entries, then the local purchases could not be held to be genuine. Therefore, the estimation was made @0.02% on local purchases and income was enhanced to that extent. (iv) Commission income on Accommodation entries for Bogus Purchase bills supplied by the assessee The Ld. AO has estimated this commission at 7.5 paisa per Rs.100 transaction which was based on statement given by Shri Lunkaran Parasmal Kothari. The said rate was confirmed by Ld. CIT(A). 3.5 Another relief provided to the assessee was on account of expense allowance. The Ld. AO had estimated the same @10%.

23 Shri Bhanwarlal M. Jain Assessment Years: 2007-08 to 2014-15 However, viewing that taxing 90% of the gross unaccounted commission income would be grossly unfair and unjust, Ld. CIT(A) estimated the same @25% which provided partial relief to the assessee. The said estimation was justified in view of the fact that undisclosed income which was being taxed was over and above the regular income returned by the group concerns. Further, certain expenditure would be required to maintain and run vast network of entry operation business. 3.6 The entity-wise quantification of commission for the year under each head was accordingly revised by Ld. CIT(A) which has been tabulated in Para-51 of the impugned order. The gross commission income for this year has been worked out to be Rs.444.66 Lacs and after providing for expenses allowance of 25%, net addition thus sustained by Ld. CIT(A) came to Rs.333.49 Lacs as against Rs.591.95 Lacs as estimated by Ld. AO. Similar computations have been made in the impugned order for all the other Assessments years. The summary of the same has been extracted in Para-52 of the order wherein total additions from AYs 2008-09 to 2014-15 has been estimated @ Rs.6145.86 Lacs as against estimation of Rs.9031.32 Lacs as made by Ld. AO for all the years. In nutshell, a net relief of Rs.2885.45 Lacs has been provided to the assessee. For ease of reference, the quantum additions as confirmed by Ld. CIT(A) could be tabulated in the following manner: - No. Particulars % A.Y- 2008- A.Y. 2009- A.V. 2010- A. Y. 2011- A.Y. 2012- A.Y. 2013- A.Y. 2014- Total 09 10 11 12 13 14 15 1 Commission 2.40% 22623851 33129586 40746221 56203703 89025203 119485664 81958142 443172370 on Loan 2 Commission 0.075% 17191360 21285148 25911567 63514274 63400243 69864476 32927532 294094600 on sales 24 Shri Bhanwarlal M. Jain Assessment Years: 2007-08 to 2014-15 3 Commission 0.02% 1887809 1773845 1962158 5678628 4596293 2353696 1106610 19359039 on Import 4 Commission 0.02% 2763572 3739859 4864857 11190156 12697381 15848884 11718444 62823153 of local purchase 5 Gross 44466591 59928438 73484803 136586761 169719120 207552720 127710729 819449162 Unaccounted Commission 6 Less : 25% 11116648 14982110 18371201 34146690 42429780 51888180 31927682 204862291 expenses 7 Net 33349944 44946329 55113602 102440070 127289340 155664540 95783046 614586872 Unaccounted Commission The net relief as summed up by Ld. CIT(A), was as follows: - Assessment Year 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 Total Net Unaccounted 59195321 70924593 84273714 178019195 194062033 199566306 117091409 903132572 Commission Income, as per the Assessment Order (In Rs.) Net Unaccounted 33349944 44946329 55113602 102440070 127289340 155664540 95783046 614586872 Commission Income, as per the Appellate Order (In Rs.) Net Relief to the 25845378 25978264 29160112 75579125 66772693 43901766 21308363 288545700 Appellant (In Rs.)

3.7 All the other grounds raised by the assessee were dismissed in the appellate order and the appeal was partially allowed. The aforesaid adjudication has given rise to cross-appeals before us. Our findings and Adjudication

4. We have carefully heard the rival submissions, oral as well as written. We have duly appreciated the factual matrix as enumerated by us in the preceding paragraphs. The judicial pronouncements including our own order in Rajendra P. Jain V/s DCIT (ITA Nos.298/Mum/2018 & ors.; order dated 03/05/2019), as cited before us during the course of 25 Shri Bhanwarlal M. Jain Assessment Years: 2007-08 to 2014-15 hearing has been deliberated upon. We proceed to deal with the issues in the following manner.

5. The first and foremost argument taken before us is that the pen- drive as found during the course of search proceedings was planted from outside and the admission thereof was taken forcibly in statement of assessee u/s 132(4). The Ld. AR has impressed upon the idea that the search took place on 03/10/2013 whereas the said pen drive was not inventorized for 6 days. It has been submitted that the same could have been seized or inventorized on 04/10/2013 along with the inventory made for credit cards, bank account and jewellery etc. Further, the seizure of the pen drive was not made part of Panchnama annexure, officially drawn on 04/10/2013 and the admission about the same from his son Shri Rajesh Jain was extracted forcibly.

6. Going by the factual matrix as enumerated in preceding paragraphs, we find that the attitude of the assessee during the course of assessment proceedings was totally non-cooperative. In fact, the assessee remained absent during search proceedings for 3 days. The summons were not complied with and no explanation was furnished on incriminating material. Pertinently, voluminous hand written estimation sheets have been found at various premises of the assessee. The sheets have been admitted to be in the hand writing of assessee’s son as well as an employee of the assessee. These sheets contain parallel cash accounts. The entries in the estimated sheets were in the nature of square-off transaction wherein cash received from one party was paid back to another party through Angadiya Account. The pen drive contained calendar year-wise names of beneficiaries, the amount of 26 Shri Bhanwarlal M. Jain Assessment Years: 2007-08 to 2014-15 cash, details of brokerage and commission etc. It also contained complete details of Angadiya Account since 2004 in electronic form. The parallel account maintained on the pen-drive pertained to various concerns, 70 to be precise, being managed and controlled by assessee group. The password of the pen drive was cracked with the help of software programmers. After decrypting the data, print outs were taken and matched with the estimation sheets as well as other data gathered during the course of search action from various premises, disclosed as well as secret. The data was found to be identical. The complete correlation was established between the parallel books of accounts found on the pen drive with books of 70 concerns being managed and controlled by the assessee. It transpired that the daily accounts were first written manually on estimation sheets and thereafter entered into pen- drive electronically. So much so, identical pen drive was found from the possession of Shri Rohit Birawat at CST Terminus who was apprehended by the search team while attempting to flee from Mumbai to Rajasthan with incriminating material.

29 Shri Bhanwarlal M. Jain Assessment Years: 2007-08 to 2014-15 Estimation of Quantum Additions 13. The subject matter of revenue’s appeal as well as remaining ground of assessee’s appeal is related to estimation of quantum additions. For ease of reference, the comparative chart of estimation made by lower authorities in assessee’s case as well as rates estimated by us in the case of similarly placed assessee namely Shri Rajendra P. Jain could be tabulated in the following manner: - No. Nature of Transaction Estimation of Estimation Our Estimation Ld. AO of Ld. CIT(A) in Shri Rajendra P. Jain 1. Import transactions by 27.5 paisa per 2 paisa per 2 paisa per assessee on behalf of rupees 100 or rupees 100 or rupees 100 or others 0.275% 0.02% 0.02% 2. Accommodation entries of 7.5 paisa per Confirmed 5 paisa per bogus purchases provided rupees 100 or rupees 100 or by assessee 0.075% 0.05% 3. Bogus Unsecured Loans 20 paisa per Confirmed 0.50% per provided by assessee rupees 100 per annum month or 0.20% per month or 2.40% per annum 4. Commission on Local Nil 2 paisa per fully deleted Purchases made by the rupees 100 or assessee 0.02% 5. Expense Allowance 10% of Gross 25% of Gross 50% of gross Commission Commission commission 30 Shri Bhanwarlal M. Jain Assessment Years: 2007-08 to 2014-15 We are inclined to make estimation on similar lines keeping in view the factual matrix of the case, incriminating material on record & admission made by the assessee. Considering the peculiar facts of the case and keeping in view the magnitude of transactions carried out by the assessee vis-à-vis the factual matrix in Shri Rajendra P. Jain, we are inclined to estimate the assessee’s income in the following manner: - No. Nature of Transaction Our Estimation in the present case 1. Import transactions by We confirm the stand of Ld. CIT(A) i.e. the estimation assessee on behalf of would be @2 paisa per rupees 100 or 0.02% others 2. Accommodation entries of 5 paisa per rupees 100 or 0.05% instead of 7.5 paisa bogus purchases provided per rupees 100 or 0.075% as estimated by Ld. AO and by assessee confirmed by Ld. CIT(A) 3. Bogus Unsecured Loans 1% per annum instead of 2.40% per annum as provided by assessee estimated by Ld. AO and confirmed by Ld. CIT(A) 4. Commission on Local Fully deleted as against 2 paisa per rupees 100 or Purchases made by the 0.02% as enhanced by Ld. CIT(A) assessee 5. Expense Allowance 25% of Gross Commission i.e. the stand of Ld. CIT(A) is confirmed

14. The estimation of 0.02% on import purchases as made by Ld. CIT(A) is based on confessional statement of the assessee and the same is also corroborated by relevant entries made in the estimation sheets which is illustrated in the impugned order. Therefore, we confirm this estimation. The estimation of commission on local purchase is based primarily on the assumption that the assessee would have earned commission on all the transactions. However, there is no reference to any incriminating material while making this enhancement. The assessee has also not 31 Shri Bhanwarlal M. Jain Assessment Years: 2007-08 to 2014-15 admitted to have earned such commission. Thus, the same is based on mere presumption and hence, we are inclined to delete the same. The estimation of 0.05% on accommodation entries of bogus purchases provided by assessee is based on our estimation in the case of Shri Rajendra P. Jain. Our estimation with respect to bogus unsecured Loans provided by assessee draw strength from the fact that the assessee has carried out maximum transactions of this nature. The rate of commission may not be constant in all the transactions. Therefore, estimating the same merely on the basis of few illustrations only may not be a correct approach. Keeping in view the notions of equity and reasonableness, we have estimated the same @1% per annum which is much more than our estimation in the case of Shri Rajendra P. Jain. The expenses allowance of 25%, in our considered opinion, would be more than enough to take care of the estimated expenses being incurred by the assessee to carry out its operations under all these concerns keeping in view the magnitude of the transactions. The assessee was maintaining all the concerns in a centralized manner. Evidently, the assessee was employing only a limited number of trusted employees only and the expenditure would remain, more or less, constant even if the number of concerns would have become more. The expenditure could not be assumed to have increased in direct proportion to the increase in turnover. Therefore, the estimation as made by Ld. CIT(A) is reasoned one and no further relief could be provided to the assessee, on this account.

32 Shri Bhanwarlal M. Jain Assessment Years: 2007-08 to 2014-15 Having said so, no other benefit / credit of returned income etc. would be available to the assessee. No credit of taxed paid by various entities would be available since TDS refund has been claimed by many of these entities. In other words, the addition in the hands of the assessee would be over and above respective returned income of these concerns and also without any benefit of taxes paid by these concerns.

23. So far as the legal ground of validity of reassessment proceedings is concerned, we concur with the view taken by Ld. CIT(A). The original return of income filed by the assessee was processed u/s 143(1). It could be noted that the Ld. AO was clinched with tangible material upon which a reasonable belief of escapement of income could have been formed. The new tangible material showed possible escapement of 35 Shri Bhanwarlal M. Jain Assessment Years: 2007-08 to 2014-15 income in the hands of the assessee. At this stage, nothing more, in our opinion, was required to reopen the case of the assessee in terms of decision of Hon’ble Supreme Court in Raymond Woollen Mills Ltd V/s ITO (1999; 236 ITR 34). Further, the reopening was initiated as per due process of law and there was no violation of principle of natural justice. The plea, thus raised by Ld. AR, stands dismissed.

Sd/- Sd/- (Mahavir Singh) (Manoj Kumar Aggarwal) उपाध्यक्ष / Vice President लेखा दस्य / Accountant Member मुिंबई Mumbai; सदनािंक Dated : 06/08/2021 Sr.PS, Dhananjay 37 Shri Bhanwarlal M. Jain Assessment Years: 2007-08 to 2014-15 आदेशकीप्रधिधलधपअग्रेधर्ि/Copy of the Order forwarded to : 1. अपीलाथी/ The Appellant 2. प्रत्यथी/ The Respondent आयकरआयुक्त(अपील) / The CIT(A) 3. 4. आयकरआयुक्त/ CIT– concerned 5. सवभागीयप्रसिसनसध, आयकरअपीलीयअसधकरण, मुिंबई/ DR, ITAT, Mumbai 6. गार्डफाईल / Guard File