SRI GAUTAM KUMAR PINCHA,KOLKATA vs. ITO, WARD 34(4), KOLKATA, KOLKATA

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH ‘SMC’, KOLKATA [Before Shri P.M. Jagtap, AM] Assessment Year: 2011-12 Shri Gautam Kumar Pincha................................……………………………………………Appellant Room No. 604, 6th Floor, 19, Synagogue Street, Kolkata – 700 001. [PAN: AKGPP 6211 L] I.T.O. Ward 34(4) Kolkata,...................……………………………………………............Respondent Aayakar Bhawan, Poorva, 110, Shantipally, Kolkata – 700 107. Appearances by: Shri Miraj D Shah, AR appearing on behalf of the Assessee. Shri P.K. Mandal, Addl. CIT appearing on behalf of the Revenue. Date of concluding the hearing : February 19, 2018 Date of pronouncing the order : April 11, 2018

ORDER This appeal filed by the assessee is directed against the order of Ld. CIT(A) - 10, Kolkata dated 30.08.2017 and the solitary issue involved therein relates to the addition of Rs. 4,57,600/- made by the A.O. and confirmed by the Ld. CIT(A) on account of alleged bogus purchases of diamonds.

Assessment Year: 2011-12 Shri Gautam Kumar Pincha fabricated nor self made. Your assessee has brought merchandise in form of 91.52 carats and polished diamonds at the rate of Rs. 5,000/- per carat aggregating Rs. 4,57,600/- against the purchase from M/s. Nazar Impex Pvt. Ltd. The payments of this transaction has been made through account payee instrument. No cash was received back by the assessee from M/s. Nazar Impex Pvt. Ltd. in lieu of the purchase invoice no NIPLS/PD/JUL/16/10-11 dated 24.07.2010 from Rs. 4,57,600/- from any person. The entire quantity of 91.52 carats of diamonds were entered into stock register in July, 2010 and from time to time the stock of diamonds have been sold. Both entries for inward movement and outward movement are reflected in the stock register. The implication of this accounting as well as stock entries suggest that the entire quantity of 91.52 carats of diamonds have been recorded properly which are sold during the financial year 2010-11 or subsequently. The movement of diamonds is controlled and therefore there is no question of there being bogus purchase of diamonds from Nazar Impex Pvt. Ltd. Further the books of accounts and other records like invoices, statements, vouchers etc. are maintained in the proper manner and there are audited as per the provisions of I.T. Act, 1961 and the auditors have not made by adverse remards against the maintenance and appropriateness of the accounts.”

b. The appellant has not been able to counter in any manner the observations of the Ld. A.O. regarding the bank statement furnished by the assessee, and the fact that from such statement it emerges that the impugned payment was made in favour of the alleged seller several days after the date on which the assessee has claimed to have made the purchase. I agree with the Ld. A.O. that such a happening is very unlikely because no seller would sell goods to an unknown buyer on credit, and therefore it militates against basic tenets of commercial transactions the seller(s) waited for one month for payment from an unknown buyer (the appellant-assessee) from Kolkata. c. The appellant-assessee was unable to provide any evidence of the transportation of the diamonds from the seller to Kolkata, or the movement of the buyer from Kolkata to Mumbai. In any business, it is quite expected that even if the goods are handed over by hand, there has to be confirmation of handing over / taking over of goods as a part of the record of transactions. These are vital documents, and are a sine quanon, even if there may not be any evidence of freight or transport. In the instant case, such vital evidence is conspicuous by its absence. d. There is not much merit in the argument of the Ld. AR that payments were made by account payee cheques, as these indicate documents for transfer of money, and remain mere documents without the corresponding documents relating to transfer of goods. In my considered view of the matter, the evidentiary value of payments by bank therefore is enormously diminished for the case at hand.

Assessment Year: 2011-12 Shri Gautam Kumar Pincha e. I also find that there is no merit in the claim of the appellant that the Ld. A.O. did not conduct any independent enquiry from his side. It is to be observed that at any rate the onus was cast upon the appellant to clearly bring on record that the purchases were made from the alleged parties, especially as the transactions were suspicious in nature. For the case at hand, the appellant has failed to discharge such basic onus of proof of delivery.”

For the reasons given above and keeping in view the ratio of the various case laws discussed in his impugned order, the Ld. CIT(A) confirmed the addition of Rs. 4,57,600/- made by the A.O. by treating the purchase of diamonds claimed to be made by the assessee by M/s. Nazar Impex Pvt. Ltd. as bogus. Aggrieved by the order of the Ld. CIT(A), the assessee has preferred this appeal before the Tribunal.

Assessment Year: 2011-12 Shri Gautam Kumar Pincha Book to point out that 91.52 carats of cut and polished diamonds were purchased by the assessee under an authentic bill wherein all the relevant details including VAT and CST no of the supplier were given. He also invited my attention to the copy of ledger of M/s. Nazar Impex Pvt. Ltd. in the books of account of the assessee placed at page no 7 of the Paper Book to point out that payments against said purchases made on 26.07.2010 were settled on 31.07.2010 and 16.08.2010 by account payee cheques. He contended that there was thus no inordinate delay in making payments against the said purchases as presumed by the authorities below. He also invited my attention to the copy of relevant stock record to show that the quantity of diamonds purchased by the assessee from M/s. Nazar Impex Pvt. Ltd. was duly entered in stock record and sale of the same was also duly shown in the stock record. He contended that the authorities below however brushed aside this entire evidence brought on record by the assessee to establish the genuineness of the purchases in question and treated the same as bogus by relying on the information received from the Investigation Wing without verifying the claim of the assessee independently. By relying on the decision of Division Bench of this Tribunal in the case of Manoj Begani vs ACIT (ITA 932 to 936 dated 15.12.2017), he contended that the similar claim of the assessee for purchases based on similar documentary evidence was allowed by the Tribunal.

Assessment Year: 2011-12 Shri Gautam Kumar Pincha entries. He contended that the said information was sufficient to show that the genuineness of the purchases in question claimed to be made by the assessee from M/s. Nazar Impex Pvt. Ltd. was doubtful and the unusual delay in payment by the assessee against the said purchases further established that it was a case of bogus purchases. He contended that the assessee also failed to establish the mode of delivery of the diamonds claimed to be purchased from Surat party. He contended that all these circumstances were sufficient to show that the purchase of diamonds claimed to be made by the assessee from M/s. Nazar Impex Pvt. Ltd. was bogus and the authorities below were fully justified in disallowing the same.

Assessment Year: 2011-12 Shri Gautam Kumar Pincha dated 14.07.2010 was genuine. It was also pointed out that the payment against the said bill was settled by account payee cheque and the quantity of diamond purchased was not only entered into the stock register, but even corresponding sale of the same was duly recorded. The relevant documentary evidence was also filed by the assessee before the A.O. to support and substantiate his explanation. As rightly contended by the learned counsel for the assessee, the authorities below however brushed aside this cogent evidence produced by the assessee and treated the purchase of diamonds by the assessee from M/s. Nazar Impex Pvt. Ltd. as bogus merely on the ground that there was some delay in payment by the assessee against the said purchase. No enquiry whatsoever was made by them to verify the claim of the assessee for the purchase of diamond in question from M/s. Nazar Impex Pvt. Ltd. which was duly supported by the relevant documentary evidence.

assessee has produced the VAT return and VAT audit report also, which is placed at pages 73 to 86 of the paper book. The assessee has also produced the sales bill related to diamonds sold out by the assessee which was made out of the very same purchases disallowed by the A.O. which is found place from pages 56 to 59 of the paper book. We note that the A.O. has not disturbed the sales shown by the assessee in respect of the diamond purchased from M/s. Vitrag and M/s. Arihant and M/s. Kangan (AY 2010-11 to 2012-13). When the sales of the very same diamonds have been accepted by ASSESSING OFFICER/CIT(A) without a murmur, the purchases could not have been disallowed without cogent material. In this case, for whatever reason best known for him, Shri Rajendra Jain who controls M/s. Vitrag and M/s. Arihant have made the statements wherein he explain in detail the modus of the whole operation, which defies logic and can be termed absurd on the fact of it, and when the fact remains that he and his concerns were legally importing jewels/diamonds directly from foreign suppliers named in Box ‘B’ and that he admits of receiving the cheques / RTGS from assessee in Box ‘E’ and when the fact remains that Shri Rajendra Jain’s concern M/s. Vitrag and M/s. Arihant utilised the cheques / RTGS given by the assessee (for the diamond purchased by him) and in turn is remitted in foreign exchange towards the bills raised by the foreign exporters (Box ‘B’), in no way show that the assessee had made any purchase outside the books or from the grey market. We are unable to understand as to the role of the nine persons (whose names are appearing in Box ‘D’). The modus operandi as suggested by Shri Rajendra Jain does not fit into the logic or rational reasoning of a common prudent person. However, the uncontroverted fact remains that Shri Rajendra Jain and his concerns are legally importing the diamonds directly from foreign concerns stated in Box ‘B’ on credit (we explained earlier), so it is not understood as to what is the role of persons named in Box ‘D’. Shri Rajendra Jain’s answer to question no 26 that he and his concerns placed the orders with the foreign concerns named in Box ‘B’ and collets the diamond in his office / show room. Let us pause for a minute and let us discard the role of persons named in Box ‘D’ for argument sake and then see the whole transaction. The diamonds are legally imported from foreign concerns named in Box B, by concerns in Box C which are delivered to persons in Box ‘E’ i.e. assessee and cheques / RTGS are issued in the name of the concerns controlled by Shri Rajendra Jain in Box C i.e. M/s. Vitrag and M/s Arihant which is turn they utilised the cheques / RTGS given by the assessee remit the foreign exchange to the foreign concerns in Box ‘B’. So, from all these facts discussed above, the only probability is that the role of nine persons named in Box ‘D’ can only be Assessment Year: 2011-12 Shri Gautam Kumar Pincha that of Angadias and not as that what Shri Rajendra Jain has attributed them to do. No other role can be played by these people unless and otherwise the department is able to bring any evidence to show that after the issue of cheques / RTGS to Shri Rajendra Jain’s concerns M/s. Vitrag and M/s. Arihant, the money component i.e. the unaccounted money of the assessee has been given back to the assessee, whereas it is clearly stated by Shri Rajendra Jain to Q No. 18 that cash component is generally settled by the key person controlling the concern in Box ‘D’ directly or indirectly by cheques / RTGS services of Angadia. So, therefore, the entire disallowance of the purchase / expenditure is based on surmises and conjectures, and the assessee by furnishing the documents (supra) has discharged the burden of proof casted upon it to show that the purchase was done bonafidely and not with the unaccounted money of the assessee”