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Income Tax Appellate Tribunal, DIVISION BENCH’SMD’, CHANDIGARH
Before: SMT. DIVA SINGH & DR. B.R.R. KUMAR
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.
The Assessee has raised following grounds of appeal:
That the Ld. CIT(A) erred in confirming that the notice u/s 148 is valid. 2. That Ld CIT(A) wrongly confirmed addition U/s 69C despite the fact on record that payments were made through account payee cheques from the regular books of accounts maintained. Thus section 69C is not applicable. Hence the addition made U/s 69C is liable to be deleted.
That Ld CIT(A) erred in confirming the addition although no opportunity of cross-examining was provided by the Ld. AO. 4. The Ld AO accepted books of accounts while accepting the income declared and at the same time didn't rely upon the same books while treating the purchases as bogus which is contradictory and bad in law and the Ld CIT(A) ignored this fact. 5. The Ld. CIT(A) have ignored the fact that the assessee is Trader and not a consumer and any reduction in purchases will automatically reduce the closing stocks by same amount and as a result there will be no change in the gross profit declared by assessee.
Brief facts of the case as per records are that the assessee is a trader,
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
The Assessing Officer, based on the statements of the key persons of the
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.
During the proceedings before the Ld. Counsel of the assessee has filed
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.
The Ld. CIT(A) held that the AO has rightly treated the purchases
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.
Before us, the Ld. AR argued that the principles of natural justice have not
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.
The Ld. DR relied on the order of the Ld. CIT(A).
We have gone through the factum of the case. We find that Shri Rajendra
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.”
Under such circumstances it cannot be unequivocally said that the
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.
Hence keeping in view the facts and circumstances of the cases the
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.
As a result, the appeal of the assessee is allowed for statistical purposes.
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.