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Income Tax Appellate Tribunal, KOLKATA ‘A(SMC
Before: Shri P.M. Jagtap, Vice-(KZ)
This appeal filed by the assessee is directed against the order of ld. Commissioner of Income Tax (Appeals)-11, Kolkata dated 28.01.2019 and the solitary issue involved therein relates to the addition of Rs.3,01,300/- made by the Assessing Officer and confirmed by the ld. CIT(Appeals) on account of the alleged bogus purchase of Diamond by treating the same as unexplained expenditure under section 69C of the Income Tax Act, 1961.
The assessee in the present case is an individual. On the basis of information in his possession that the assessee was a beneficiary of accommodation entry involving purchase of Diamond to the tune of Rs.3,01,300/-, a notice under section 148 of the Act was issued by the Assessing Officer for the year under consideration. In response to the said notice, the assessee did not file the return of income. During the Assessment Year: 2010-2011 M/s. Kishan Nagori (HUF) course of assessment proceedings, it was explained by the assessee that the purchase of Diamond made from M/s. Nayan Gems was genuine. A copy of the bill for the said purchase was also furnished by the assessee. As per the information in the possession of the Assessing Officer, the said purchase, however, was bogus as revealed during the course of search and seizure action conducted in the case of Sanjoy Chowdhury Group and since the assessee was one of the beneficiary of the accommodation entry received for the bogus purchase of Diamond to the tune of Rs.3,01,300/-, he made an addition of Rs.3,01,300/- to the total income of the assessee in the assessment completed under section 147/144 of the Act vide an order dated 19.10.2015.
Against the order passed by the Assessing Officer under section 147/144, an appeal was preferred by the assessee before the ld. CIT(Appeals) and since the submission made by the assessee in support of his case on the issue under consideration was not found acceptable by him, the ld. CIT(Appeals) confirmed the addition made by the Assessing Officer, inter alia, for the following reasons given in paragraph no. 5.8 to 5.11 of his impugned order:- “5.8. Once it has been established that bill issued for purchase of diamond by Nayan Gems was bogus and fake and that there was no physical delivery of diamond because the said Nayan Gems never dealt in physical sale or purchase of diamond, and once it was also established that in lieu of cheque issued by desiring parties said Nayan Gems or Sri Sanjoy Chowdhury confessed of having returned cash to the issuer of cheque, the entire facade of purchase of diamond comes crumbling down. 5.9. The next question raised by the A.R is that since the diamond in question has been shown as asset in the Balance Sheet and since the appellant has not claimed any deduction for purchase of the same, the Ld. A.O could not have made addition on that account. The argument has been carefully considered. It is a fact that-the appellant has claimed certain purchases for which the explanation offered by it has not been found to be correct. The appellant has incurred expenditure for purchase of diamond which has also not been properly explained. The theory of payment made by a/c payee cheque is found wanting in view of acceptance by the Assessment Year: 2010-2011 M/s. Kishan Nagori (HUF)
receiver and cheques of the fact that in lieu of a/c payee cheque, he used to return cash to the issur of cheques. Therefore, in essence, the appellant has not spent the amount recorded on its cheque, towards purchase of diamond in question. Hence, the claim of purchase of diamond is bogus. The appellant, as is evident from the above quoted statement of Shri Sanjay Choudhary, appears to have purchased diamond from a foreign party for which payments have been made through unaccounted sources. The bill and the payment by cheque has been put up to lend a face of genuineness to the transaction.
5.10 The said diamond, if at all purchased, was purchased from a source which was not disclosed by the appellant and the effort to obtain the above referred bill was only aimed at regularising and unexplained expenditure towards purchase of diamond by arranging payment through a/c payee cheque for which cash of equivalent amount was received by the appellant. Thus, the amount spent by the appellant on the purchase of diamonds recorded in its books have not been explained satisfactorily.
5.11. In view of the above discussed facts, the ld. A.O. is directed to add Rs.3,01,000/- to the taxable income of the appellant as unexplained expenditure for purchase of diamond within the meaning of section 69C of the Act. The addition made by the AO is upheld and the appeal is dismissed”.
Aggrieved by the order of the ld. CIT(Appeals), the assessee has preferred this appeal before the Tribunal.
I have heard the arguments of both the sides and also perused the relevant material available on record. As submitted on behalf of the assessee before the ld. CIT(Appeals) as well as before the Tribunal, the purchase of Diamond treated to be bogus was never claimed by the assessee as deductible expenditure and, therefore, the amount of such purchase cannot be added to the total income of the assessee even if it is found to be bogus. The purchase of Diamond was treated by the assessee as his investment and the same was duly reflected in the balance-sheet of the assessee as demonstrated by his ld. Counsel at the time of hearing before the Tribunal. The amount against the said purchase was also paid by the assessee by an account payee cheque through his disclosed Bank Assessment Year: 2010-2011 M/s. Kishan Nagori (HUF) account and it is beyond any comprehension to treat the same as unexplained investment of the assessee much less an unexplained expendiutre under section 69C. The source of the amount utilized for making purchase of Diamond was duly explained and disclosed by the assessee and the reasons given by the ld. CIT(Appeals) to treat the same as unexplained expenditure under section 69C, in my opinion, is nothing but a figment of imagination. At the time of hearing before the Tribunal, even the ld. D.R. has failed to point out any specific provision under which the impugned addition can validly be made to the total income of the assessee. Keeping in view all the facts and circumstances of the case, I delete the addition made by the Assessing Officer and confirmed by the ld. CIT(Appeals) on the issue under consideration and allow this appeal of the assessee.
In the result, the appeal of the assessee is allowed. Order pronounced in the open Court on September 11, 2019.