INCOME TAX OFFICER 19(2)(2), MUMBAI, MUMBAI V. MUNJAL R. MEHTA, MUMBAI

ITA 4217/MUM/2025

AI Insights

The case revolves around the Income Tax Department's appeal against the order of the CIT(A), which had deleted the additions made by the AO regarding the assessee's income for the assessment year 2007-08. The AO had treated certain purchases as non-genuine based on evidence from a search and seizure operation conducted on groups allegedly involved in providing bogus entries for loans and sales. The Tribunal examined the materials and arguments presented by both parties, including the nature of the business operations and the role of various individuals and entities involved. The Tribunal's decision emphasized the lack of direct evidence linking the assessee to the bogus transactions alleged by the AO.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 792013 (ITAT-MUMBAI)
• Duration Of Justice: 5 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-12-2025
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2007-2008
• Appeal Filed On: 25-06-2025
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: RAJESH SAKHARDANDE
• Assessee Lawyers: VIJAY BIYANI
• Keywords: Business income; Bogus purchase; Search and seizure; Accommodation entries; Bogus
• Section: 132

Judgement Text

"1 IN THE INCOME TAX APPELLATE TRIBUNAL “SMC” BENCH, MUMBAI BEFORE SHRI SANDEEP GOSAIN, JUDICIAL MEMBER I.T.A. No. 4217/Mum/2025 A.Y: 2007-08 ITO 19 (2)(2) Room No. 503, 5th Floor Pirmal Chambers, Labaug, Mumbai -400 012. Vs Munjal R Mehta S. No. 1224, office Mo. 4090 Bharat Diamond Bourse, BKC, Bandra (E), Mumbai PAN – AAAFM2344K (Appellant) (Respondent) CO No. 279/Mum/2025 A.Y: 2007-08 Munjal R Mehta S. No. 1224, office Mo. 4090 Bharat Diamond Bourse, BKC, Bandra (E), Mumbai PAN – AAAFM2344K Vs ITO 19 (2)(2) Room No. 503, 5th Floor Pirmal Chambers, Labaug, Mumbai -400 012. (Appellant) (Respondent) Assessee by Shri Vijay Biyani Revenue by Shri Rajesh Sakhardande, Sr. DR Date of Hearing 28.10.2025 Date of Pronouncement 11.12.2025 ORDER Per: SHRI. SANDEEP GOSAIN, J.M.: The present appeal has been filed by the revenue and CO has been filed by the assessee challenging the impugned order dt. 26.03.2025 passed under section 250 of the Income Tax Act, 1961 (‘the Act’), by the National Faceless Appeal Centre Printed from counselvise.com 2 ITA No. 4217/Mum/2025 CO. 279/Mum/2025 Munjal R. Mehta, Mumbai. (NFAC) / CIT(A) for the assessment year 2007-08. Firstly we take up revenue appeal in ITA No. 4217/Mum/2025, A.Y 2007-08. ITA No. 4217/Mum/2025, A.Y 2007-08 2. All the grounds raised by the revenue are interrelated and interconnected and relates to challenging the order of Ld. CIT(A) in deleting the entire addition made by AO. Therefore I have decided to adjudicate these grounds through the present consolidated order. 3. I have heard the counsels for both the parties, perused the material placed on record, judgements cited before us and also the orders passed by the revenue authorities. From the records, I noticed that as per the facts of the present case the assessment was completed at a total income of Rs. 30,75,840/- thereby treating the purchases as non genuine. As per the facts a search and seizure action u/s 132 of the Act was carried out in the case of Rajendra Jain Group, Sanjay Choudhary Group and Dharmichand Jain Group on 03.10.2013. The search action resulted into collection of evidences and other findings which proved that the above mentioned persons through a web of benami concerns run and operated by them are providing entries in the nature of bogus unsecured loans and bogus sales. The business modus operandi of these concerns have been mentioned by the AO in detail in its order. The operative portion of the order of AO is contained in para 6.1 to 6.12 and the same is reproduced herein below: Printed from counselvise.com 3 ITA No. 4217/Mum/2025 CO. 279/Mum/2025 Munjal R. Mehta, Mumbai. 6.1 The business Modus operandi of these concerns are (i) Their concerns are engaged in merely paper transactions. (ii) In the name of their numerous concerns, they import rough and cut & polished diamonds for the other clients who do not want to show import in their own books. The physical delivery of the diamonds so imported is immediately handed over to these actual importers after clearance of the consignment by CHA (iii) These concerns issue bills/give accommodation entries for a commission to various parties who normally purchase diamonds in cash from undisclosed parties and need bills to show purchases against sales in their account. iv) They also provide accommodation entries of unsecured loans against cash. 6.2 Accommodation entry of bogus sales. There are others who want to take accommodation entries of bogus purchases with a view to reduce their taxable income by increasing purchase expenses. All such parties approach the likes of Rajendra Jain /Sanjay Choudhary to get bogus accommodation entry for purchases. The benami concerns of Rajendra Jain Group/Sanjay Choudhary Group import diamonds on behalf of real importers to whom these diamonds are handed over out of books. But in the regular books of accounts of the benami concerns, the imported diamonds still appears as stock (bogus). This is the reason, why during the course of search no stock of diamond was found from any of the residential or business premises of these persons and their employees. Against this bogus stock, bogus sale bills are issued to beneficiary parties who are in need of taking accommodation entries for bogus purchases. For this purpose, cheques are issued by the beneficiary parties against the bogus sale bills issued by the benami concerns of Rajendra Jaih/Sanjay Coudhary/Dharmichand. Subsequently, cash is returned back to these beneficiary parties after deducting commission on Sarne by Rajendra Jain/Sanjay Choudhary/Dharmichand jain. Printed from counselvise.com 4 ITA No. 4217/Mum/2025 CO. 279/Mum/2025 Munjal R. Mehta, Mumbai. 3.3 Searches/enquiries conducted on various persons who are shown as name sake directors, partners and proprietors: In the search action conducted on Rajendra Jain group, Sanjay Choudhary Group and Dharmichand Jain Group on 03/10/2013, the Investigation Wing, Mumbai covered name sake/dummy directors/partners/proprietors of various concerns that were being actually managed, controlled and operated by the said groups. 6.4 Employees and not Directors, partners or proprietors. Examination on oath of all the name sake/dummy directors/partner's /proprietors of various concerns revealed that they are merely employees of Rajendra Jain/Sanjay Choudhary and are looking after miscellaneous office work like depositing cheques in banks, handing over parcels to clients, making data entry etc. 6.5 No genuine knowledge of diamond business. Since these persons are employees and are associated with the office work, they do have perfunctory knowledge about the nature of business activity of the concerns in which they are shown as directors, partners and proprietors. However, all of them do not have any in depth knowledge of diamond industry like assorting cutting, manufacturing etc. 6.6 As Employees receive Salary. All these persons are in receipt of salary, mostly in cash. At times the salary is disbursed to them on need basis as and when required. It has been observed that the profit of the concerns which such employees are shown as directors, partners and proprietors are maintained more or less equivalent to their, annual salary. In the regular books of the said concerns the profit is shown to be appropriated by the concerns and for doing miscellaneous office work, looking after banking transactions and data entry of the accounts etc. 6.7 In this regard, it is important to reproduce the relevant extract of answers given by the said Shri Rajendra Jain, under Printed from counselvise.com 5 ITA No. 4217/Mum/2025 CO. 279/Mum/2025 Munjal R. Mehta, Mumbai. oath u/s. 132 of the Act on 3.10.2013. The same is reproduced as under:- Q.12 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? Sir in fact, the proprietory 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 proprietory 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.13 Please furnish details of all the business concerns which are directly or indirectly controlled by you along with Shri Surendra Jain. Ans: We are operating through a number of business concerns of all the three nature, 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 entire business network on profit sharing basis. (The names of all the concerns operated by these persons were handed over to the IT Officers.) Q.14 During the survey action undertaken at various office premises of yours, 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 Printed from counselvise.com 6 ITA No. 4217/Mum/2025 CO. 279/Mum/2025 Munjal R. Mehta, Mumbai. which we do not 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. During the course of search and seizure action statement of Shri Sachin Pareek (Prop: of Arihant Exports, director of Karnawat Impex P. Ltd & Moulimani Impex Pvt.Ltd., Shri Manish Sushil Jain (Prop: of Kalash Enterprises, director of M/s. Kriya Impex P Ltd. And Karnawat Impex Pvt.Ltd.) and Shri Anoop Y Jain (Prop. Of. Aadi Impex) has also been recorded. All the above persons in their statement admitted that they were acting as per the directions of their bosses namely Shri Rajendra Jain and Shri Surendra Jain, for which they were getting salary. Hence, it is clear the concerns are totally controlled and managed by Shri Rajendra धकार all E INCON ain and Shri Surendra Jain and other directors/partners/proprietors are St name lenders who are actually employees of Shri Rajendra Jain and ari Surendra Jain. 6.8 No personal contact with the importers. All the concerns are' shown to be engaged in import of diamonds. However, when these name sake directors/partners/proprietors were specifically asked to explain as to how they contacted the parties from whom the imports have been made in the respective concerns, they were unable to comment on the same. They all admitted of not having any personal/direct. contact with any of the importers. They also admitted of not having visited any foreign countries for the purpose of business, The facts mentioned above prove that these employees have never made any import on their own and all the imports in the concerns in which they are shown as directors, partners and proprietors are made at the direction of Shri Rajendra Jain. They import rough and cut & polished diamonds for the other clients who do not want to show import in their own books. 6.9 Admission by namesake directors/partners/proprietors. Printed from counselvise.com "