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Income Tax Appellate Tribunal, “B-SMC”BENCH: KOLKATA
Before: Shri A. T. Varkey, JM ]
PER SHRI A.T. VARKEY, JM
This appeal is preferred by the assessee against the order of Ld. CIT (A), 12, Kolkata dated 21.06.2019 for the assessment year 2007-08.
At the outset itself, Shri Subash Agarwal, Advocate, ld.AR submitted that he is not pressing ground nos. 1 & 2 raised by the assessee. Therefore, the same stands dismissed.
Ground no. 3 raised by the assessee is against the action of the ld. CIT(A) in confirming the addition of Rs. 1,11,278/- made by the AO treating the same as bogus purchase of jewellery.
Brief facts of the case are that the assessee had filed his return of income for A.Y 2007-08 on 06-10-2017 declaring a total income of Rs. 1,91,720/-. The return was processed on 16-10- 2008. Thereafter, the AO notes that he received an information from the DGIT (INV), Mumbai that the assessee had taken bogus accommodation entries in-respect of purchase of jewellery from M/s. Virag Jewels during the A.Y under consideration and the same was revealed during search & seizure operation on 03-10-2013 at the premises of M/s. Virag Group of concerns. According to the AO, evidence(s)/ statement(s) were collected from various persons which were recorded during said search & seizure operation, which unearthed shri Ravindra Jain’s concerns [M/s. Virag Jewellery] involvement in providing 1 I.T.A No.2157/Kol/2019 A.Y 2007-08 Ashok Saraf Huf
accommodation entries and that the assessee has been given the benefit of an amount of Rs. 1,11,278/- during the A.Y 2007-08. The AO has reproduced the statement(s) given by the persons of Rajendra Jain Group which was recorded during search at pages-2 & 3 of the assessment order. Thereafter, the AO concludes that M/s. Virag Jewels gave bogus purchase bill to the assessee without actual delivery of diamonds by providing accommodation entry for said bogus purchase and added Rs.1,11,278/-. The AO concludes as under:-
“4) In this case the Diamond was purchased by bill number VJS/PD/NOV/09/2006-07 dated 10/11/2006 amounting of Rs. 1,11,278/- from M/s. Virag Jewels Prop: Mudit Karnawat. The payment of the bill was made though cheque. It has been crystal clear from the statement given by the Mr. Rajendra Jain the key person of M/s. Virag Jewels that there is no delivery of diamond has been made against this type of purchase from his concern only bogus purchase bill was created. This has been obvious from that the assessee did not get delivery of diamond from M/s. Virag Jewels only bogus purchase bill was created for accommodation entries.
5) It is also worth to mention that the at the time of survey operation not a single piece of diamond has been found by the survey teams at various office premises of Rajendra Jain Group. All these circumstantial evidences show that there is bogus purchase bill amounting of Rs. 1,11,278/- was created by M/s.Virag Jewels for the assessee without giving actual delivery of diamonds. This bill has been used by the assessee against purchase made with unrevealed cash from undisclosed parties. The money used for purchase remain unexplained and from the conduct of the assessee it has ascertain that total transaction was made out of book hence bogus purchase amounting of Rs.1,11,278/- added to the income of the assessee on a justified reasons. “
Aggrieved, the assessee preferred an appeal before the ld. CIT(A), who was pleased to confirm the addition made u/s. 69 of the Income-tax Act, 1961 (hereinafter referred to as the “Act” by holding as under:-
2.1 I have gone through tr e written submission and heard the Ld. A/R who sought to discount the 'statement, recorded in the premises of alleged suppliers by claiming that the statement recorded was of the person other than the owner or actual seller. Ld. A/R has sought to differentiate between the suppliers, defacto owner of Vitrag Jewels and Prop. Of Vitrag Jewels and is attempting to reason out that there is no statement of actual seller who has delivered goods' and took payment. I am unable to appreciate the said reasoning of the Ld.A/R. As established from the survey/search & seizure enquiries, the said group through dummy persons being employees of the group was running an accommodation entry racket of supplying: of diamonds without associated delivery. If the statements of the persons and physical verification carried out at the said premises proved accommodation entry business without any linkage to physical existence of diamond, the modus operandi stands proved. The 2 I.T.A No.2157/Kol/2019 A.Y 2007-08 Ashok Saraf Huf
conclusion that accommodation entries were taken by the appellant, is not based on a mere statement but" has been established through records and physical enquiries in the associated premises. If therefore, do not accept he claim of the Ld. AIR that the appellant took delivery of real diamond from the said concern. The statement of concerned persons is corroborative, because non existence of diamond and issue of bogus bills were proved from records and physical absence or 'non existence of diamond any time or at the material time. I. therefore, support the A.O's finding that the appellant took accommodation entry and did not receive diamond from Vitrag Jewels though the A.O has noted that payment was made in cheque. The appellant has also accepted or accorded with the A.O's finding that the payment was made in cheque, but the said payment in cheque does not help the appellant because the A.O's case is that the entry was taken which necessitates payment in cheque. It is the whole purpose of the entry to create a trail and so payment trail in bank A/cs no way questions the A.O's finding, In view of the above, I support the A.O's finding that only entry was taken. 2.2 As regards, impact of entry on the total income, the A.O's decision appears vague as he is not very clear as to why the said amount should be treated as additional income to be added to the total income declared by the assessee. So I have to reason out whether this transaction has implication for the taxable income. As the appellant has claimed repeatedly that it was in possession of diamond of said value and as the payment associated with the bogus bills is not the actual payment for diamond It claims to have possession of, the diamond it owns remains unexplained as to the source of acquisition of that diamond. Thus the diamond possessed by the appellant represents its undisclosed income. This income, , therefore, needs to be added u/s.69 of the I. T Act as that investment cannot be explained by the cheque payment associated with the bogus bill which was no payment for the diamond actually possessed. 3. The ground, therefore, is not allowed and the appeal is dismissed. “
Aggrieved, the assessee is before this Tribunal. The Ld. AR assailed the decision of the Ld CIT(A) and the Ld. DR supported the order of the CIT(A) and does not want me to interfere in the impugned order.
I have heard both the parties and perused the record. From perusal of the conclusion of the AO, it is noted that the assessee had purchased diamond for which a bill numbered VJS/PD/NOV/09/2006-07 dated 10/11/2006 amounting to Rs. 1,11,278/- from M/s. Virag Jewels, Prop: Mudit Karnawat was issued to him. The payment of the bill was made through cheque. This bill as well as bank statement reflecting the payment has been found placed at paged 3-4 of the paper book. Copy of the ledger account is also found at pages5-7 of the assessee’s paper book. I also note from perusal of balance sheet as on 31-03-2005, page-2 of the paper book jewellery worth of Rs.1394682/- has been reflected. The assessee is also a wealth tax payee and valuation report of the jewellery and ornaments valued by registered 3 I.T.A No.2157/Kol/2019 A.Y 2007-08 Ashok Saraf Huf
valuer, Shri Umesh Kumar Srimal, has been placed before me dt. 31-03-2014 (at page-2 of the paper book), wherein I note that Item No. 2, One Packet loose cut & polished diamonds Wt. 4.01 Cts, worth Rs.1,40,350/- is valued. The Bill Dt. 10/11/2006 at page-3 of the paper book, it shows that the assessee had purchased Cut & Polished Diamonds weighing 4.01 Cts @ Rs. 27,750/- per Ct, which comes to Rs. 1,11,278/- as on 10-11-2006. From a perusal of the aforesaid documents ex facie shows that assessee has purchased the diamond in question which cannot be called bogus because its physical existence is proved by the valuation made by the registered valuer dated 31.03.2014 and corroborative evidence has been placed on record. In the aforesaid scenario, I also note that a similar case of Monaj Begani V/s. ACIT, in ITA Nos. 932, 933 to 935 & 936/Kol/2017 order dt. 15-12-2017, wherein the author of this order has after in depth analysis of the evidence/material clearly in that case held vide para 14 of the said order the sequence of events/Modus-operandi that after the order is placed by the importer of diamonds, the concerns of Mr. Rajendra Jain in turn places orders for diamonds from foreign exporters and when the consignment of diamonds reached either in Mumbai or in Surat, the actual delivery of the consignment comes first to Shri Rajendra Jain Office and collect the booked consignment on behalf of actual importer. Thereafter, it is delivered to the actual importer/customers through Angadias and the cheque/RTGS payments are made by the end customers directly from their bank account to M/s. Virag Jewels [Shri Rajendra Jain concerns] and the Tribunal was pleased to delete the addition made by the department. In that case, the Tribunal passed a detailed order, wherein statement of all the relevant persons which were on record and discussed by the lower authorities to make the addition were analysed in detail. Moreover, from a look at the statement of Shri Surendra Jain in respect to Q. 14 has not been appreciated, so it is reproduced as under:-
“Q.1 4 During the survey action undertaken at various office premises of yours , not a single piece of diamond has been found by respective survey teams through there is substantial turnover shown by various concerns controlled by you. Please state as to where do you keep your stock in trade.
An. Sir. in this regard. I want to admit that we are engaged in business of bill shopping through all the concerns due to which we don 't have any physical stock of diamond with us at any of our place at any point of time. I would like to further add that we are merely lending names of our various concerns to the real importer of diamonds who takes the actual delivery of diamonds.
From a bare perusal of the aforesaid Question and the Answer by Shri Rajendra Jain, it is clear that his concerns does not keep any stock of diamond at any point of time and 4 I.T.A No.2157/Kol/2019 A.Y 2007-08 Ashok Saraf Huf
that the real importer of diamonds takes actual delivery of diamonds. And the billing of the same (diamonds) takes place in different name of the Rajendra Jains concerns. This question and answer shows that diamonds are not kept as physical stock-in-trade with Rajendra Jain’s concerns. However, the diamonds imported by Shri Jain’s concerns are actually delivered to the actual importer of diamonds and the billing of the imported diamonds are shown in the name of Jain’s different concerns. After analysing the entire question and answers of the recorded statements in depth, I am of the opinion that the Q(question) & A (answer) given by shri Rajendra Jain and others has not been properly appreciated and considered by the AO in the assessment order. However, since I have analysed all the Q & A given by Shri Rajendra Jain while passing the order in the case of Manoj Begani (supra), I find that no addition is warranted in this case also. Moreover, addition invoking section 69 of the Act by the ld. CIT(A) cannot be sustained in the eyes of law because investment of jewellery has been duly reflected in the books of account of assessee as well as the source of fund is un-disputedly from the assessee’s disclosed bank account. Thus, I note that source of investment has been properly and satisfactorily explained by the assessee. In such circumstances, I am of the view that addition made by the AO and confirmed by the ld. CIT(A) cannot be sustained in the eye of law and the same is directed to be deleted. This ground of assessee is allowed.
Ground no. 4 is relating to TDS credit of Rs.9,540/-. According to the assessee, the TDS credit as per law has not been granted to the assessee. For verification of the same, we remand this issue back to the file of the AO and the assessee is directed to produce necessary documents/evidences to substantiate that TDS credit has not been given to the assessee. If the AO find that the claim is valid , then TDS credit needs to be granted to the assessee in accordance to law.
In the result, the appeal of the assessee is partly allowed for statistical purpose.
Order Pronounced in the Open Court on 20th December, 2019
Sd/- A.T. Varkey Judicial Member Dated 20 -12-2019 PP(Sr.P.S.)
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Copy of the order forwarded to: 1. Appellant/Assessee: Sri Ashok Saraf HUF C/o Subhas Agarwal & Associates, Siddha Gibson, 1 Gibson Lane, Suite 213, 2nd Fl., Kolkata-69. 2 Respondent/Revenue: The I.T.O., Ward 34(4), Aaykar Bhawan, Dakshin, 2 Gariahat Road, Kolkata-27. 3. CIT, 4. CIT(A), Kolkata. 5. DR, Kolkata Benches, Kolkata **PP/SPS True Copy By By Order Assistant Registrar ITAT Kolkata
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