SH. RAJ KUMAR SAMANT,PATIALA vs. ITO, W-3, PATIALA

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH’SMD’, CHANDIGARH BEFORE SMT. DIVA SINGH, JUDICIAL MEMBER AND DR. B.R.R. KUMAR, ACCOUNTANT MEMBER ITA No.1664/Chd/2017 Assessment Year: 2009-10

Sh. Raj Kumar Samant Vs. The ITO M/s R.S. Diamonds & Gold Works Ward-3 Shop No. 7, 1st Floor Patiala Diamond Plaza, Adalat Bazar Patiala

PAN No. ARIPS3611A

(Appellant) (Respondent)

Assessee By : Shri. H.R. Saldi Revenue By : Shri. Yoginder Mittal

Date of hearing : 11/07/2018 Date of Pronouncement : 16/07/2018 ORDER PER DR. B.R.R. KUMAR, A.M:

The present appeal has been filed by the Assessee against the order of the Ld. CIT(A)-3, Ludhiana dt. 16/10/2017.

dealing in sales and purchases of gold, diamond and silver Jewellery. During the

year under consideration, An information was received by the AO from the

Director General of Income Tax(lnvestigation), Mumbai that the assessee has

made transaction of Rs.3,01,245/- and involved making Bogus/sham purchases

of Diamond Jewellery from M/s Sun Diam, Surat , a bogus concern of Rajendra

Jain Group. It was also noticed by the Assessing Officer that a search had

already been made in the business premises of M/s Rajendra Jain Group on

31.03.2013 and during the statement recorded the Shri Rajendra Jain himself

stated that he was only indulged in providing accommodation entries in the

nature of bogus sales and unsecured loans

Rajendra Jain Group recorded on oath wherein they admitted that all the

concerns controlled and managed by them are not doing any real trading in

diamonds but indulged in paper transactions only and treated an amount of Rs.

Rs.3,01,245/-as unexplained Expenditure and added to his expenditure for the

year under consideration under the section 69C of the Income Tax Act, 1961.

written arguments as under:

• During the relevant period search and seizer operations were carried out at Mumbai / Surat. Statements of various persons were recorded. On the basis of those statements it was presumed that instant assessee assessee was suppressing his income. • The basis seems to short-sighted. Assessee purchased gold and diamond from various parties and incorporated the same in his books of account. The said goods were duly sold either to dealers or to the end consumers. Said sales have duly been accounted for in our books of account and have duly been declared in the returns filed with the Excise & Taxation Department. Copies of relevant documents were furnished. • The Impugned purchases from M/s Sun Diam Surat were actually made and have duly been accounted for. Payment against the said purchase has duly been made through banking channel. Account Payee cheque was issued.

Copies of Trading accounts, party's accounts and purchase bills were furnished and placed on record. Assessee, asserts that he has actually purchased the goods, has incorporated the same in his books of account. Sales have duly been made, incorporated in his books of account and have duly been declared in the returns filed with Excise & Taxation Department. • The Department has accepted the said sales and purchases. It was requested that facts may kindly be ascertained before proceeding with the case any further. • It was requested that all the necessary details and all relevant original documents may kindly be provided to the assessee, relevant person/persons may be produced/ confronted for verification/ cross-examination, so that assessee may be in a position to explain, offer comments and defend his case in the Re- Assessment proceedings.

amounting to Rs.3,26,100/- as bogus purchases in view of explicit finding after

search operation carried out in Rajendra Jain group , sanjay chaydhry group

and Dharm Chand Jain group who were found to be operating as entry

providers operating in Mumbai.

6.1 The Ld. CIT further held that the Assessing Officer has also mentioned and

reproduced the relevant portions of the statement of these directors. It was held

that while going through the statements it is amply clear that the directors have

admitted in clear terms that no actual sale or purchase was carried out through

these paper concerns being run by these persons and all the entries were sham

or bogus entries in lieu of certain amount.

been followed in the case of the assessee and no proper opportunity is given

before making the addition. It was argued that the statement recorded by the department clearly reveals that the Shri Rajendra Jain and Shri Surendra Jain are

merely lending names of our various concerns to the real importer of diamonds

who takes the actual delivery of diamonds. He argued that to the extent the

diamonds have been duly purchased and there was no dispute about the

import of the diamonds.

Jain and Others were issuing bogus bills and on the statement recorded on oath

it was also conveyed that they were lending names for the real importer of the

diamonds. The relevant part of the statement recorded is as under:

“ Q. It has come to the notice that your employees are also running their independent proprietorship concerns of their own. Do you know? If yes, Please explain as to how they do justice with the roles and responsibilities assigned to them by you?

Ans. Sir, in fact, the proprietary concerns in the names of our employees are not independent business activity of their own. When I was working for Shri Ratanlal Jain, besides other concerns, he had been also operating through M/s Minar Gems, a proprietary concern in my name. So, after quitting the job, I took the idea of operating through various concerns including several proprietorship concerns in the names of our employees. In such a case, the effective control of business remains with us and the business income of such proprietorship concern get adjusted against the overall salary payable to such employee on annual basis.

Q. Please furnish details of all the business concerns which are directly or indirectly controlled by you alongwith Shri Surendra Jain.

Ans. Sir, we are operating through a number of business concerns of all the three indirectly i.e. proprietorship firm, partnership firm as well as companies in the name of various persons including our employees. But for all practical purposes, myself and Shri Surendra Jain are handling the entries business network on profit sharing basis.

Q. During the survey action undertaken at various office premises of your not a single piece of diamond has been found by respective survey teams though there is substantial turnover shown by various concerns controlled by you. Please state as to where do you keep your stock in trade. Ans. 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.”

assessee has not purchased the diamonds. However, at the same time the

assessee has to prove the sequence of meeting the prospective sellers, the

process of purchase of goods and carrying of the diamonds from Surat to his

business premises to claim genuinity of the transaction. On the other hand the

Revenue is also ought to have followed the principles of natural justice by

confronting the persons who has issued the statements before the department

to the assessee for cross examination.

matter is hereby remanded back to the file of the Ld. CIT(A) to pass a speaking

order and to provide the opportunity of cross examination to the assessee and

also to obtain further reports / information from the Assessing Officer as deemed

fit for adjudication of the case. Similarly the assessee would also furnish all the

relevant documents before the CIT(A) to prove the genuinity of the transaction.

Order pronounced in the open Court.

Sd/- Sd/- (DIVA SINGH) (DR. B.R.R. KUMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER

Dated : 16/07/2018 AG Copy to: 1. The Assessee 2. The Respondent 3. The CIT 4. The CIT(A) The DR 5.