ITO, Ward-2(3)(7), Surat V. Shri Bhagchand Kumhar, Surat

ITA 1163/AHD/2017

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 4850 (ITAT-SURAT)
• Duration Of Justice: 4 year(s) 4 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-09-2021
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2013-2014
• Appeal Filed On: 11-05-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RASESH SHAH
• Assessee Lawyers: O P VAISHNAV
• Keywords: Bogus purchase; Rejection of books of accounts; Search and seizure; Principle of natural justice; Corroborative evidences; Accommodation entries; Retraction
• Section: 143(3); 143(1); 143(2); 192; 145(3); 69

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT BEFORE SHRIPAWAN SINGH, JM &DR. A.L.SAINI, AM ./ ITA NO.1163/AHD/2017 ( / ASSESSMENT YEAR: (2013-14) (VIRTUAL COURT HEARING) THE INCOME TAX OFFICER, WARD-2(3)(7), SURAT. VS. SHRI BHAGCHANDKUMHAR, 103, GOPINATHJI COMPLEX, BHOJABHAINI SHERI, MAHIDHARPURA, SURAT 395003. ./ ./PAN/GIR NO.: BRGPK 8444 L (ASSESSEE) (RESPONDENT) ./ ITA NO.1221/AHD/2017 ( / ASSESSMENT YEAR: (2013-14) SHRI BHAGCHANDKUMHAR, 103, GOPINATHJI COMPLEX, BHOJABHAINI SHERI, MAHIDHARPURA, SURAT 395003. VS. THE INCOME TAX OFFICER, WARD-2(3)(7), SURAT. ./ ./PAN/GIR NO.: BRGPK 8444 L (ASSESSEE) (RESPONDENT) ASSESSEE BY :SHRI RASESH SHAH - CA RESPONDENT BY :SHRI O.P.VAISHNAV CIT(DR) / DATE OF HEARING : 14/09/2021 / DATE OF PRONOUNCEMENT : 27/09/2021 / O R D E R PER DR. A. L. SAINI, ACCOUNTANT MEMBER: CAPTIONED CROSS APPEALS FILED BY THE REVENUE AND ASSESSEE PERTAINING TO THE ASSESSMENT YEAR 2013-14, ARE DIRECTED AGAINST THE ORDER PASSED BY THE LD.COMMISSIONER OF INCOME TAX(APPEALS)-1 [LD.CIT(A)], SURAT DATED 28.02.2017 WHICH IN TURN ARISES FROM OUT OF AN ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961, DATED 23.03.2016. 2. FIRST WE SHALL TAKE ASSESSEE`S APPEAL. GRIEVANCES RAISED BY THE ASSESSEE IN ITA NO.1221/AHD/2017, ARE AS FOLLOWS: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AS WELL AS LAW ON THE SUBJECT, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS PAGE | 2 ITAS NO.1163 & 1221/AHD/2017 FOR A.Y. 2013- 14 SHRI BHAGCHANDKUMHAR ERRED IN PARTLY CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN SUSTAINING THE ADDITION OF RS 32,50,000/- OUT OF THE TOTAL ADDITION MADE BY THE ASSESSING OFFICER OF RS. 6,49,99,999/- ON ACCOUNT OF BOGUS PURCHASE. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AS WELL AS LAW ON THE SUBJECT, THE LEARNED ASSESSING OFFICER HAS ERRED IN REJECTING BOOK RESULT BY INVOKING PROVISIONS OF SECTION 145(3) OF THE ACT. 3. IT IS THEREFORE PRAYED THAT THE ABOVE ADDITION MADE BY ASSESSING OFFICER AND CONFIRMED BY LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) MAY PLEASE BE DELETED. 4. ASSESSEE CRAVES LEAVE TO ADD, ALTER OR DELETE ANY GROUND(S) EITHER BEFORE OR IN THE COURSE OF HEARING OF THE APPEAL. 3. SUCCINCT FACTS ARE THAT ASSESSEE BEFORE US IS AN INDIVIDUAL AND HAS FILED ITS RETURN OF INCOME FOR A.Y. 2013- 14 ON 27.09.2013 SHOWING TOTAL INCOME OF RS. 11,40,170/- WHICH WAS PROCESSED U/S 143(1) OF THE ACT AND ACCEPTED THE RETURNED INCOME. LATER ON, CASE WAS SELECTED THROUGH CASS AND NOTICE U/S 143(2) OF THE I.T. ACT WAS ISSUED ON 05.09.2014. THE SEARCH PROCEEDINGS HAVE BEEN CARRIED OUT BY DDIT (INV) MUMBAI IN THE CASE OF GAUTAM JAIN GROUP AT MUMBAI. FROM VARIOUS INCRIMINATING DOCUMENTARY EVIDENCE COLLECTED AND THE STATEMENT OF SHRI GAUTAM JAIN, DURING THE COURSE OF SEARCH, THE INVESTIGATION WING IN ITS REPORT CONCLUDED THAT THIS GROUP WAS IN THE ACTIVITY OF PROVIDING ACCOMMODATION ENTRIES AND BILLS TO ENABLE OTHERS TO ACCOUNT AS PURCHASES, SALES, OR LOAN ETC. THE MATERIAL FACTS FOUND DURING THE COURSE OF SEARCH AND SURVEY IN THE CASE OF SHRI GAUTAM JAIN GROUP STATED GIVING OF ACCOMMODATION PURCHASE ENTRIES OF RS. 6,49,99,999/- TO THE INSTANT ASSESSEE. THE ASSESSING OFFICER OBSERVED THAT IT IS PRIMA FACIE APPARENT THAT THE ASSESSEE HAS UTILIZED SUCH BOGUS ENTRIES TO SUPPRESS HIS PROFITS FOR THE YEAR UNDER CONSIDERATION. 4. IT IS SEEN THAT THE MAIN BASIS OF THE AO FOR MAKING ADDITION IS THE INFORMATION RECEIVED FROM INVESTIGATION WING, SURAT DUE TO SUSPICIOUS TRANSACTIONS MADE BY CERTAIN PARTIES WHEREIN IT WAS REVEALED THAT NO ACTUAL PURCHASE OR SALE MADE AND THESE BUSINESSES WERE SIMPLY BEING CARRIED OUT IN THE BOOKS OF ACCOUNTS WITHOUT THERE BEING ANY ACTUAL CONDUCT OF BUSINESS. DURING THE YEAR UNDER CONSIDERATION, AO HAS ALLEGED THAT THE ASSESSEE HAD PURCHASED GOODS WORTH PAGE | 3 ITAS NO.1163 & 1221/AHD/2017 FOR A.Y. 2013- 14 SHRI BHAGCHANDKUMHAR RS.6,49,99,999/- FROM TWO OF SUCH BENAMI COMPANIES, NAMELY M /S. MARINE GEMS PVT. LTD. AND M/S. PARSHWANATH GEMS PVT. LTD. CONTROLLED BY SHRI GAUTAM JAIN GROUP. IN THIS CASE, STATEMENTS OF DIRECTORS OF RESPECTIVE SELLER COMPANIES WERE ALSO RECORDED AS OBSERVED BY LD. AO IN PARA-4 OF THE ASSESSMENT ORDER. AS DISCUSSED BY THE LD. AO, SHRI PRAMOD KUMAR RANKA OF M/S. MARINE GEMS PVT. LTD. HAD ADMITTED IN HIS STATEMENT RECORDED DURING SEARCH OPERATION THAT HE IS A 'DUMMY PROPRIETOR' OF M/S. MARINE GEMS PVT. LTD., A CONCERN WHICH WAS NOT ENGAGED IN ANY BUSINESS OF ACTUAL DIAMOND TRADING BUT PROVIDING ONLY ACCOMMODATION ENTRIES. SIMILAR FACTS WERE STATED BY SHRI NARENDRA KUMAR JAIN, DIRECTOR OF M/S. PARSHWANATH GEMS PVT. LTD. ABOUT MODUS OPERANDI OF THIS CONCERN AND ADMITTED THAT NO ACTUAL BUSINESS ACTIVITY WAS CARRIED OUT BY HIS CONCERN. IN THE VIEW OF THE ABOVE OBSERVATION, THE AO OBSERVED THAT WHEN THE BOOKS OF ACCOUNT DO NOT REFLECT CORRECT AND COMPLETE ACCOUNT AND STATEMENT OF AFFAIRS, THE REJECTION OF THE BOOKS OF ACCOUNTS IS NECESSARY. THEREFORE, AO REJECTED THE BOOKS OF ACCOUNTS UNDER PROVISION OF SECTION 145(2) AND THE ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) R.W.S. 145(2) OF THE INCOME TAX ACT, AND MADE ADDITION OF RS. 6,61,40,170/- UNDER SECTION 69 OF THE ACT. 5. AGGRIEVED BY THE ORDER OF THE ASSESSING OFFICER, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE LD CIT(A)WHO HAS RESTRICTED THE ADDITION TO @5% OF IMPUGNED PURCHASES OFRS.6,49,99,999/- WHICH WORKED OUT TO RS.32,50,000/- IN VIEW OF THE DECISION OF JURISDICTIONAL HIGH COURT IN THE CASE OF M/S. MAYANK DIAMONDS (2014) 11 TMI 812 (GUJ). 6. AGGRIEVED BY THE ORDER OF LD CIT(A), THE REVENUE AS WELL AS ASSESSEE, BOTH ARE IN APPEALS BEFORE US. 7. SHRI O.P. VAISHNAV, LEARNED DR FOR THE REVENUE HAS FAIRLY AGREED THAT LD CIT(A) HAS SUSTAINED THE ADDITION @5% OF IMPUGNED PURCHASES, RELYING ON THE JUDGMENT OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF M/S. MAYANK DIAMONDS (2014) 11 TMI 812 (GUJ), THEREFORE, THE BENCH SHOULD CONFIRM THE ADDITION SUSTAINED BY THE LD CIT(A). PAGE | 4 ITAS NO.1163 & 1221/AHD/2017 FOR A.Y. 2013- 14 SHRI BHAGCHANDKUMHAR 8. PER CONTRA LEARNED COUNSEL, SHRI RASESH SHAH, BEGINS BY POINTING OUT THAT ALLEGATION OF THE AO ABOUT BOGUS PURCHASES/ACCOMMODATION ENTRY WAS NOT CORRECT. THE ASSESSEE HAS CLAIMED THAT ENTIRE PURCHASE AND SALES WERE GENUINE AND VERIFIABLE WITH REFERENCE TO THE DOCUMENTS - PURCHASE BILLS, STOCK REGISTER, BANK STATEMENT SHOWING PAYMENT TO, THESE CONCERNS. THE LD COUNSEL HAS STRONGLY OBJECTED THAT UNTIL AND UNLESS, AN OPPORTUNITY OF CROSS-EXAMINATION IS GRANTED, SUCH ADVERSE MATERIAL CANNOT BE USED AGAINST THE ASSESSEE. THIS IS IMPORTANT TO MENTION THAT BOTH THESE PERSONS HAVE RETRACTED THEIR CONFESSIONAL STATEMENTS LATER ON. THE LD COUNSEL HAS ALSO CONTENDED THAT ALLEGED PURCHASES MADE FROM THE TWO CONCERNS WERE DULY SOLD BY THE ASSESSEE DURING THE YEAR AND THE ASSESSEE HAS EARNED PROFIT ALSO ON SUCH SALES. SINCE THE ENTIRE SALES HAVE BEEN ACCEPTED BY THE AO IN TERMS OF QUANTITY AND AMOUNT, THEN AS PER THE ASSESSEE THERE IS NO SCOPE FOR DOUBTING THE PURCHASES OF MATERIAL WHICH DULY SUPPORTED BY ALL THE DOCUMENTARY EVIDENCES AND PAYMENTS WERE ALSO MADE THROUGH PROPER BANKING CHANNELS. THE LD COUNSEL FURTHER SUBMITTED THAT APART FROM THIS INFORMATION AND STATEMENTS OF RESPECTIVE PERSONS, THERE IS NO POSITIVE EVIDENCE BROUGHT ON RECORD BY THE AO TO SUBSTANTIATE HIS FINDINGS THAT THE ASSESSEE HAS ACTUALLY RECEIVED ONLY ACCOMMODATION BILLS WITHOUT ACTUALLY RECEIVING ANY GOODS SHOWN AS PURCHASES. THE LD. AO HAS NARRATED THE ENTIRE ALLEGED 'MODUS OPERANDI' IN VERY GENERIC TERMS WHICH SEEMINGLY COPIED FROM THE REPORT RECEIVED FROM THE DDIT (INV)-III, SURAT DELINEATING INFORMATION ABOUT THE INFORMATION DUG OUT FROM SEARCH AND SEIZURE OPERATION CARRIED OUT IN THE CASE OF GAUTAM JAIN GROUP. THEREFORE, LD COUNSEL PRAYS THE BENCH THAT ENTIRE ADDITION SHOULD BE DELETED. 9. WE HAVE HEARD BOTH THE PARTIES AND CAREFULLY GONE THROUGH THE SUBMISSION PUT FORTH ON BEHALF OF THE ASSESSEE ALONG WITH THE DOCUMENTS FURNISHED AND THE CASE LAWS RELIED UPON, AND PERUSED THE FACT OF THE CASE INCLUDING THE FINDINGS OF THE LD CIT(A) AND OTHER MATERIALS BROUGHT ON RECORD. WE NOTE THAT FIRST GRIEVANCE OF THE LD COUNSEL IS THAT UNTIL AND UNLESS, AN OPPORTUNITY OF CROSS-EXAMINATION IS GRANTED, ADVERSE MATERIAL CANNOT BE USED AGAINST THE ASSESSEE. WE NOTE THAT IN THE PRESENT CASE, ASSESSEE SUBMITTED BEFORE ASSESSING OFFICER THE PURCHASE BILLS, STOCK REGISTER, BANK STATEMENT SHOWING PAGE | 5 ITAS NO.1163 & 1221/AHD/2017 FOR A.Y. 2013- 14 SHRI BHAGCHANDKUMHAR PAYMENT TO, THESE CONCERNS THROUGH BANKING CHANNEL. THERE IS NO EVIDENCE THAT CASH HAS BEEN RETURNED TO THE ASSESSEE EQUIVALENT TO THE AMOUNT OF BOGUS PURCHASES. THE ASSESSING OFFICER HAS FRAMED THE ASSESSMENT UNDER SECTION 143(3) OF THE ACT. THEREFORE, WE ARE OF THE VIEW THAT IN THE ASSESSEE`S CASE, THE ASSESSING OFFICER HAS NEITHER BROUGHT OUT ANY INDEPENDENT MATERIAL ON RECORD TO PROVE HIS ALLEGATION THAT SAID PURCHASES OFRS.6,49,99,999/- FROM M/S. MARINE GEMS PVT. LTD AND M/S. PARSHWANATH GEMS PVT. LTD WERE BOGUS. THE ASSESSING OFFICER HAS NOT PROVIDED AN OPPORTUNITY TO CROSS-EXAMINE THE DIRECTORS OF THESE COMPANIES ABOUT AFFIDAVITS FILED BY THEM. THIS IS ALSO AN ADMITTED FACT THAT COPY OF ANY OTHER CLINCHING OR CONCRETE EVIDENCE PROVING THE ALLEGATION WAS NOT PROVIDED TO THE ASSESSEE TO DEFEND HIS CASE. NO OPPORTUNITY OF CROSS-EXAMINATION WAS EVER ALLOWED TO THE ASSESSEE. THIS HAS BEEN HELD BY THE HON'BLE SUPREME COURT IN THE CASE OF ANDAMAN TIMBER INDUSTRIES VS. COMMISSIONER OF CENTRAL EXCISE KOLKATA IN CIVIL APPEAL NO.248 OF 2006 THAT IN ABSENCE OF CROSS-EXAMINATION OF PARTIES, THE ASSESSMENT PROCEEDINGS TO BE QUASHED. FURTHER, THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF PRAFUL CHUNILAL PATEL VS. M.J. MAKWANA [236 1TR 832 (GUJ)]AND JCIT &ORS VS. GEORGE WILLIMSON (ASSAM) LTD. [258 ITR 126 (GUJ)] HAS HELD THAT STATEMENT OF THIRD PARTY CANNOT BE RELIED UPON WITHOUT HAVING ANY CORROBORATIVE EVIDENCE. SIMILARLY, HON'BLE SUPREME COURT IN THE CASE OF KISHANCHAND CHELLARAM V/S. CIT 125 ITR 713 (SC) HAS HELD THAT ADVERSE INFERENCE CANNOT BE DRAWN AGAINST THE ASSESSEE FROM THE STATEMENT OF THIRD PARTIES. BASED ON THIS FACTUAL POSITION, LD COUNSEL PRAYS THE BENCH THAT ENTIRE ADDITION SHOULD BE DELETED. 10. BEFORE THE BENCH, LD COUNSEL FURNISHED COMPREHENSIVE SUBMISSION WITH ALL THE DOCUMENTARY EVIDENCES SUBMITTED BEFORE THE ASSESSING OFFICER (THE COPY OF THE SAME WAS PROVIDED TO LD DR FOR REVENUE ALSO), THE SAME IS REPRODUCED BELOW: SR. NO. SUBMISSION BY THE ASSESSEE COGNIZANCE/REMARKS/FINDING S OF THE AO REMARKS OF THE ASSESSEE 1 COPIES OF PURCHASE INVOICE NO ADVERSE FINDINGS OF THE AO ON THE SAME PURCHASES INVOICES ARE FOUND TO BE IN ORDER AND GENUINE 2 COPY OF STOCK REGISTER REFLECTING THE PURCHASES AND SALES NO ADVERSE FINDINGS OF THE AO ON THE SAME. THE AO HAS NOT DOUBTED OR RAISED ANY SUSPICION ON THE SALES MADE BY THE ASSESSEE IN TERMS OF QUANTITY AND AMOUNT. SINCE, THE SALES ARE NOT DOUBTED IN TERMS OF QUANTITY AND AMOUNT BY THE AO THE IMPUGNED ADDITION MADE OF BOGUS PURCHASES IS ABSOLUTELY UNWARRANTED AND UNJUSTIFIED 3 COPY OF BANK STATEMENT NO ADVERSE FINDINGS OF THE THE PAYMENTS MADE TO SUPPLIERS ARE PAGE | 6 ITAS NO.1163 & 1221/AHD/2017 FOR A.Y. 2013- 14 SHRI BHAGCHANDKUMHAR HIGH LIGHTING THE PAYMENT MADE TO THE SUPPLIERS AO ON THE SAME NOR ANY OTHER MATERIAL OR CLINCHING EVIDENCE BROUGHT ON RECORD BY THE AO TO PROVE THAT THE PAYMENT HAS NOT BEEN MADE BY THE ASSESSEE TO THE SUPPLIER OTHERWISE THAN PROPER BANKING CHANNEL. FOUND TO BE IN ABSOLUTE ORDER THROUGH PROPER BANKING CHANNELS AND THUS GENUINENESS OF THE TRANSACTION OF PURCHASE AND PAYMENT THEREOF CANNOT BE DOUBTED. 4 COPY OF BANK STATEMENT OF PARSWANATH GEMS PVT. LTD AND MARINE GEMS PVT. LTD NO ADVERSE FINDINGS OF THE AO ON THE SAME TRANSACTION REFLECTED IN THE BANK STATEMENT OF THE TWO DOUBTED GENUINE SUPPLIERS BY THE AO IS FOUND TO BE CORRECT AND DULY RECONCILED WITH THE BOOKS OF THE ASSESSEE IN RESPECT OF THE PAYMENT RECEIVED BY THEM FROM THE ASSESSEE 5 COPY OF ACKNOWLEDGMENT OF RETURN OF INCOME AUDITED BALANCE-SHEET, CONFIRMATION STATEMENT, OF PARSWANATH GEMS PVT. LTD., AND MARINE GEMS PVT LTD. THE AO HAS NOT FOUND ANYTHING ADVERSE IN THE RETURN OF INCOME AUDITED BALANCE-SHEET, THEIR CONFIRMATION STATS, COPY OF SALES BILLS RAISED BY THEM TO THE ASSESSEE OF THE TWO SUPPLIERS. BOTH THE SUPPLIER COMPANIES HAVE FURNISHED ALL THE REQUIRED DETAILS LIKE THEIR CONFIRMATION STATEMENTS, RETURN OF INCOME, BALANCE-SHEET, SALE BILL, THEIR BANK STATEMENTS WHICH ABSOLUTELY RECONCILES WITH THE CORRESPONDING ENTRIES SHOWN BY THE ASSESSEE IN HIS BOOKS OF ACCOUNT WHICH HAS NOT BEEN DOUBTED BY THE AO NOR ANY NEGATIVE REMARKS ON THE SAME HAS BEEN MADE BY THE AO IN THE IMPUGNED ASSESSMENT ORDER. 6 RETRACTION STATEMENT IN THE FORM OF AFFIDAVIT DONE BY SHRI PRAMOD KUMAR RANKA, DIRECTOR OF MARINE GEMS PVT. LTD./, AND MR. NARENDRA KUMAR JAIN, DIRECTOR OF PARSHWANATH GEMS PVT. LTD., STATING THE FACT THAT THE STATEMENT RECORDED U/S 131(1A) AND 132(4) WERE SIGNED BY THEM UNDER PRESSURE FROM THE INCOME TAX DEPARTMENT WHATEVER STATED BY THEM IN THOSE STATEMENTS IS NOT TRUE AND DECLARE THE SAME AS VOID THE AO HAS STATED THAT RETRACTION STATEMENT IS AN AFTERTHOUGHT AND SELF-SERVING DOCUMENT AND CANNOT BE ACCEPTED ON ITS FACE VALUE. THE AO HAS MADE REMARKS IN ABSOLUTE SUMMARY MANNER AND HAS DISREGARDED THE RETRACTION STATEMENT AND ALL THE SUPPORTING EVIDENCE SUBMITTED BY THE ASSESSEE AND HAS MADE THE IMPUGNED ADDITION ON ACCOUNT OF BOGUS PURCHASES WITHOUT BRINING ANY CLINCHING EVIDENCE ON RECORD TO PROVE THAT THE PURCHASES ARE BOGUS PURELY ON THE BASIS OF STATEMENT WHICH ARE THEREAFTER DULY RETRACTED BY THE PARTIES. 7 IT WAS SUBMITTED BEFORE THE AO TO PROVIDE COGENT MATERIAL AND EVIDENCES GATHERED DURING SEARCH CARRIED OUT ON SHRI GAUTAM JAIN AND HIS GROUP CONCERNS OTHER THAN INFORMATION RECEIVED FROM DGIT (INV), MUMBAI THE AO HAS FAILED TO BRING ANY EVIDENCE ON RECORD OTHER THAN THE INFORMATION RECEIVED FROM DGIT (INV.MUM). THE AO HAS JUST RELIED ON THE STATEMENT GIVEN BY THE THIRD PARTY NAMELY SHRI GAUTAM JAIN WHICH WAS GIVEN BEFORE DDIT (MUM) WHICH CAN BE USED AGAINST THEM BUT CANNOT BE USED AGAINST THE ASSESSEE WITHOUT BRINGING COGENT, CLINCHING OR MATERIAL EVIDENCE ON RECORD. THE SAID ACTION OF THE AO IS ABSOLUTELY UNJUSTIFIED CONSIDERING THE FACT THAT IN ORDER TO FRAME AN ASSESSMENT THE ASSESSING OFFICE HAS TO BRING INDEPENDENT EVIDENCE ON RECORD AGAINST THE ASSESSEE SO AS TO PROVE THAT THE PURCHASES ARE BOGUS, WHEREIN ON THE OTHER HAND HE HIMSELF HAS NOT DOUBTED THE SALES DONE BY THE ASSESSEE. 8 REQUESTED FOR THE COPY OF STATEMENT AND OPPORTUNITY TO CROSS-EXAMINE THE PERSON WHO HAS GIVEN STATEMENT BEFORE THE DDIT (MUM) THE AO DID NOT ACCEPT THE REQUEST OF THE ASSESSEE AND WRONGLY ALLEGED THAT THE ASSESSEE KNOWS THE SUPPLIER AND SHOULD HAVE FILE A DEFORMATION CASE AGAINST THE SUPPLIER FOR GIVING WRONG STATEMENT IN THE FIRST PLACE AND SINCE THE ASSESSEE HAS NOT FILED A DEFORMATION CASE AGAINST THE ASSESSEE IT SHOWS THAT THE ASSESSEE IS IN HAND-IN-GLOVES WITH THE HAWALA OPERATORS. THERE IS NO CLINCHING EVIDENCE OR DOCUMENTS GATHERED BY THE AO FROM THE BOOKS OF ACCOUNT AND SUBMISSIONS MADE BY THE ASSESSEE SO AS TO PROVE THAT THE PURCHASES ARE BOGUS. THE AO HAS RELIED ON THE STATEMENT OF THE THIRD PARTY AND NOT GIVING THE STATEMENTS ON WHICH THE DEPARTMENT HAS RELIED AND REFUSING THE REQUEST OF CROSS-EXAMINING SUCH THIRD PARTY ON WHOSE STATEMENT THE DEPARTMENT IS RELYING IS ABSOLUTELY UNJUSTIFIED AND AGAINST THE PRINCIPLE OF NATURAL JUSTICE AND EQUITY. 9 THE ASSESSEE HAS SUBMITTED ALL THE REQUIRED DOCUMENTS FROM TIME TO TIME IN RESPECT OF PURCHASE AND SALE OF GOODS THE AO HAS NOT RAISED ANY SUSPICION AND HAS NOT DOUBTED ANY SALES MADE BY THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION. THIS FACT ITSELF PROVES THAT IF THE SALES ARE GENUINE IN TERMS OF QUANTITY AND VALUE THEN THERE IS NO SPACE FOR DOUBTING THE PURCHASE OF MATERIAL WHICH IS SUPPORTED BY ALL THE DOCUMENTARY EVIDENCESPAYMENTS OF WHICH ARE THROUGH PROPER BANKING CHANNELS. THUS, ON THIS PAGE | 7 ITAS NO.1163 & 1221/AHD/2017 FOR A.Y. 2013- 14 SHRI BHAGCHANDKUMHAR VERY GROUND THE ADDITION MADE BY THE AO OF BOGUS PURCHASE IS UNJUSTIFIED AND AGAINST PRINCIPLE OF NATURAL JUSTICE AND EQUITY. 10 SEVERAL JUDICIAL PRONOUNCEMENTS DIRECTLY APPLICABLE TO THE FACTS AND MERITS OF THE CASE WERE SUBMITTED THE AO IN HIS IMPUGNED ORDER JUST STATED TWO LINES THAT THE CASES ARE TOTALLY DISTINGUISHABLE FROM THE FACTS OF THE JUDGMENT CITED. THE JUDICIAL PRONOUNCEMENT SUBMITTED BEFORE THE AO ARE ABSOLUTELY RELEVANT WHICH EVEN A MAN OF ORDINARY PRUDENCE WOULD AGREE TO AND SUCH CASUAL APPROACH OF THE AO IN DISREGARDING ALL THE RELEVANT JUDICIAL PRONOUNCEMENTS IS NOT PROPER. WE HAVE GONE THROUGH THE ABOVE COMPREHENSIVE SUBMISSION OF LD COUNSEL AND NOTED THAT ASSESSING OFFICER HAS NEITHER BROUGHT ANY CLINCHING EVIDENCE ON RECORD THAT THE PURCHASES TO THE EXTENT OFRS.6,49,99,999/-WAS 'BOGUS PURCHASES' NOR ESTABLISHED THAT ACTUALLY SUCH PURCHASES WERE NOT MADE AT ALL. AS FAR AS STATEMENTS OF DIRECTORS OF ENTITIES ARE CONCERNED, THE ASSESSEE HAS FILED COPIES OF THEIR AFFIDAVITS DATED 30.10.2013, DULY RETRACTING THEIR EARLIER STATEMENTS RECORDED BY THE ADIT (INV.) U/S 132(4) OF THE ACT. COPIES OF THESE AFFIDAVITS HAVE BEEN FILED BEFORE LD CIT(A) DURING APPELLATE PROCEEDINGS ALSO, WHEREIN THEY HAVE DENIED ANY ALLEGATION OF ACCOMMODATION ENTRIES AND CLAIMED TO HAVE DONE GENUINE BUSINESS ACTIVITIES. FACT REMAINS THAT AO HAS NOT CROSS-EXAMINED THESE PERSONS ABOUT THE AVERMENTS MADE IN THE AFFIDAVITS. BE THAT AS IT MAY BE, FOR FASTENING OF TAX LIABILITY BY TREATING ANY ITEM AS INCOME, THE ONUS SQUARELY FALLS ON THE SHOULDER OF REVENUE THROUGH AO WHO CANNOT MINDLESSLY AND BLINDLY FOLLOW THE FINDINGS ARRIVED AT BY OTHER ARM OF DEPARTMENT, I.E. INVESTIGATION WING. WE NOTE THAT ASSESSEE HAS FURNISHED COPIES OF PURCHASES BILLS WHICH ARE APPARENTLY PROPER AND GENUINE EX- FACIE. THE SELLERS, I.E. M/S. MARINE GEMS PVT.LTD. AND M/S. PARSHWANATH GEMS PVT. LTD., HAVE PROPER CST, GST, TIN NOS. PAN NO. AND ADDRESS DULY MENTIONED ON THE SALE INVOICE. THE ASSESSEE HAS FURNISHED COPIES OF PURCHASE INVOICES AND EXTRACT OF STOCK REGISTER (ALSO FILED BEFORE AO) SHOWING DETAILS BILL-WISE AND QUANTITY- WISE, TALLY OF PURCHASE, SALES AND STOCK ON DAY-TO-DAY BASIS. IT IS SEEN THAT THE LD. AO HAS ACCEPTED THE ENTIRE SALES (BOTH QUANTITY AND AMOUNT) AND REMAINING PURCHASES (EXCEPT ALLEGED PURCHASES) WITHOUT RAISING ANY DOUBT WHATEVER ABOUT GENUINENESS OR CORRECTNESS OF SALES. IT IS SETTLED LEGAL POSITION THAT THERE CANNOT BE ANY SALES WITHOUT HAVING CORRESPONDING PURCHASES. BASED ON THESE FACTUAL POSITION, LD COUNSEL PRAYS THE BENCH THAT ENTIRE ADDITION MAY BE DELETED. PAGE | 8 ITAS NO.1163 & 1221/AHD/2017 FOR A.Y. 2013- 14 SHRI BHAGCHANDKUMHAR 11. BEFORE WE TENDER OUR OPINION ON THE ISSUE UNDER CONSIDERATION, LET US EXAMINE THE CONCLUSION REACHED BY THE LD CIT(A). WE NOTE THAT LD. CIT(A) HAS ADJUDICATED THE ASSESSEE`S ISSUE INVOLVED IN THIS LIS, IN TWO WAYS, WHICH IS REPRODUCED BELOW: (II).ADJUDICATION/CONCLUSION NO.1: 7.5 THE LD. AR HAS FILED GP WORKING FOR VARIOUS YEARS IN CASE OF THE ASSESSEE AND URGED THAT GP & NP RATIO SHOWN BY THE ASSESSEE @0.50% & 0.21% RESPECTIVELY DURING THE CURRENT YEAR IS QUITE REASONABLE IN HIS LINE OF BUSINESS. AT THE OUTSET, THE LD. AR CONTENDED THAT CONSIDERING THE NATURE OF DIAMOND BUSINESS NO UNIFORM G.P. RATIO COULD BE APPLIED. THE PAST HISTORY OF THE ASSESSEE WAS ALSO SHOWING GP RATIO IN THE RANGE OF 0.10% TO 0.13% IN LAST THREE YEARS. HENCE, THE GP RATIO SHOWN BY THE ASSESSEE DURING THE YEAR IS MUCH BETTER. DURING ORAL SUBMISSIONS, THE AR OF THE ASSESSEE RELIED UPON THE DECISION OF HON'BLE GUJARAT HIGH COURT IN THE CASE OF MAYANK DIAMOND PVT. LTD. (2014) 11 (TMI) 812 (GUJ.) WHEREIN ADDITION BASED ON G.P. RATE OF 5% HAS BEEN UPHELD. I HAVE PERUSED THE ABOVE CITED DECISION AND FOUND IT APPLICABLE TO THE FACTS OF THIS CASE. IT IS AN ADMITTED FACT THAT PURCHASING GOODS FROM GREY MARKET WOULD DEFINITELY YIELD CERTAIN BENEFITS TO THE ASSESSEE WHICH COULD BE ESTIMATED @5% BY MAKING A CONVENTIONAL ESTIMATION. FOLLOWING THE BINDING PRECEDENT OF HON'BLE GUJARAT HIGH COURT IN THE CASE OF MAYANK DIAMONDS PVT. LTD (SUPRA), WHEN THE ENTIRE CARATS OF DIAMONDS PURCHASED FROM M/S. MARINE GEMS PVT. LTD. AND M/S. PARSHWANATH GEMS PVT. LTD. HAVE BEEN SOLD DURING THE YEAR, ENTIRE PURCHASES CANNOT BE DISALLOWED AND ADDITION FOR PROFIT EMBEDDED IN SUCH DOUBTFUL OR UNVERIFIABLE PURCHASES SHOULD ONLY BE TAXED. SO, THE ACTION OF THE AO MAKING DISALLOWANCE OF ENTIRE PURCHASES FROM SAID PARTY BY TREATING THE SAME AS BOGUS IS NOT SUSTAINABLE, HENCE REJECTED. CONSIDERING THE FACTS OF THIS CASE, TAKING A HOLISTIC VIEW, I SUSTAIN THE ADDITION @5% OF IMPUGNED PURCHASES OF RS.6,49,99,999/- WHICH WORKED OUT TO RS.32,50,000/- IN VIEW OF THE DECISION OF JURISDICTIONAL HIGH COURT IN THE CASE OF M/S. MAYANK DIAMONDS (SUPRA). THE RATIO OF HON'BLE GUJARAT HIGH COURT IS BINDING AND FACTS OF THE PRESENT CASE ARE ALSO QUITE SIMILAR TO M/S. MAYANK DIAMOND CASE, THEREFORE I UPHOLD THE ADDITION TO THE EXTENT OF RS.32,50,000/- AND GRANT A RELIEF OF RS.6,17,49,999/- (RS.6,49,99,999 - RS.32,50,000). THE GROUND OF APPEAL IS PARTLY ALLOWED.] (II).ADJUDICATION/CONCLUSION NO.2: 7.6 BEFORE PARTING, EVEN IF IT IS ASSUMED THAT ALLEGED SELLER PARTIES, NAMELY M/S. MARINE GEMS PVT. LTD. AND M/S. PARSHWANATH GEMS PVT. LTD. WERE NOT DOING ANY GENUINE BUSINESS ACTIVITY BUT ONLY ENGAGED IN THE BUSINESS OF PROVIDING ACCOMMODATION ENTRIES AS ALLEGED BY THE LD. AO AND ALSO SUPPORTED BY CONFESSIONAL STATEMENTS OF DIRECTORS OF THESE COMPANIES INTER ALIA INFORMATION GATHERED BY INVESTIGATION' WING, THEN IT WOULD MEAN THAT THESE CONCERNS WERE EARNING ONLY 'COMMISSION INCOME' AGAINST ISSUE OF ACCOMMODATION BILLS. THIS PRESUMPTION WOULD LEAD TO A NATURAL INFERENCE THAT IN RESPECT OF GOODS SHOWN AS PURCHASES WORTH RS.6,49,99,999/-, THE ASSESSEE HAS SHOWN SALES OF RS.6,74,44,796/- IS ALSO NOT GENUINE WHICH HAS RESULTED INTO PROFIT OF RS.24,44,797/- @3.76%. ON FURTHER SCRUTINY, IT IS SEEN THAT THERE IS NO ONE TO ONE PAGE | 9 ITAS NO.1163 & 1221/AHD/2017 FOR A.Y. 2013- 14 SHRI BHAGCHANDKUMHAR MAPPING OF ALLEGED PURCHASES WITH SALES. THE ASSESSEE HAS PURCHASED GOODS 5115.88 CARATS FROM TWO CONCERNS FOR RS.6,49,99,9??/- AND SHOWN SALES OF 5188.59 CARATS FOR RS.6,74,44,796/- [ANNX.L OF WRITTEN SUBMISSION DATED 23.02.2017]. IF THE SALES QUANTITY IS ADJUSTED TO ALLEGED PURCHASE QUANTITY, THEN CORRESPONDING SALES VALUE WORKS OUT TO RS.6,64,99,662/- YIELDING PROFIT OF RS.14,99,663/- (AS AGAINST RS.24,44,797/- WORKED OUT BY THE LD. AR) @2.25%. OBVIOUSLY, ANY ACTION ON THE PART OF THE ASSESSEE OF INFLATION OF PURCHASE PRICE BY OBTAINING 'ACCOMMODATION BILLS' CANNOT YIELD HIGHER PROFIT THAN ESTIMATED BY ME @5%. HENCE, ON THIS COUNT ALSO ESTIMATION OF PROFIT OF RS.32,50,000/- SEEMS TO BE QUITE JUSTIFIED AND FAIR. 12. WE HAVE GONE THROUGH BOTH THE CONCLUSION REACHED BY THE LD CIT(A) AND NOTICED THAT IN CONCLUSION NO.1, THE LD CIT(A) SUSTAINED THE ADDITION@5% OF IMPUGNED PURCHASES OF RS.6,49,99,999/- WHICH WORKED OUT TO RS.32,50,000/-. IN ALTERNATIVE CONCLUSION NO.2, THE LD CIT(A) HAS WORKED OUT THE ADDITION TO THE TUNE OF RS.14,99,663/-. WE NOTE THAT LD CIT(A) HAS HIMSELF WORKED OUT THE ALTERNATIVE ADDITION TO BE SUSTAINED AT RS. RS.14,99,663/-. THAT IS, PROFIT IF PURCHASES ARE SOLD IS WORKED OUT AT (RS.6,64,99,662 RS.6,49,99,999 = RS.14,99,663/-. NOW THE QUESTION BEFORE US IS THAT WHY NOT THE ALTERNATIVE ADDITION WORKED OUT BY LD CIT(A) SHOULD NOT BE SUSTAINED, IN THE HANDS OF THE ASSESSEE? WE NOTE THAT LD CIT(A) IS PART OF THE DEPARTMENT (REVENUE), WHO HIMSELF HAS WORKED OUT THE ADDITION OF RS.14,99,663/-, WHICH MAY BE SUSTAINED IN THE HANDS OF THE ASSESSEE. IT IS SETTLED LEGAL POSITION THAT WHERE TWO VIEWS ARE AVAILABLE ON AN ISSUE, THE VIEW FAVOURABLE TO THE ASSESSEE HAS TO BE FOLLOWED. WE NOTE THAT ARTICLE 265 OF THE CONSTITUTION OF INDIA WHICH SAYS THAT 'NO TAX SHALL BE LEVIED OR COLLECTED EXCEPT BY AUTHORITY OF LAW'. THE CONSTITUTION HAS CONFERRED UPON THE RIGHT TO COLLECT THE DUE TAXES FROM THE ASSESSEES TO THE REVENUE DEPARTMENT. AS PER THE AFORESAID ARTICLE, IT IS THE DUTY OF THE ASSESSEES TO PAY THE TAX WHAT IS RIGHTFULLY DUE TO THE GOVERNMENT AND IT IS THE RESPONSIBILITY OF THE TAX OFFICIALS TO COLLECT THE REVENUE WHAT IS RIGHTFULLY DUE TO THE GOVERNMENT BY FOLLOWING THE DUE PROCESS OF LAW. SINCE, THE LD CIT(A) (DEPARTMENT) HAS WORKED OUT THE ALTERNATIVE ADDITION OF RS.14,99,663/-, ON WHICH THE ASSESSEE SUPPOSED TO PAY THE TAXES. IN THE INSTANT CASE, THE LD. CIT(A) HAS HIMSELF WORKED OUT THE ALTERNATIVE ADDITION, WHICH CAN BE SUSTAINED IN THE HANDS OF THE ASSESSEE, THEREFORE, WE ARE OF THE VIEW THAT SAID ALTERNATIVE ADDITION, (WHICH IS A LESSER ADDITION), SHOULD BE SUSTAINED IN THE HANDS OF PAGE | 10 ITAS NO.1163 & 1221/AHD/2017 FOR A.Y. 2013- 14 SHRI BHAGCHANDKUMHAR THE ASSESSEE. WE NOTE THAT HON'BLE SUPREME COURT IN THE CASE OF VEGETABLE PRODUCTS LTD. 88 ITR 192 HELD THAT IF TWO REASONABLE CONSTRUCTIONS OF A TAXING PROVISION ARE POSSIBLE THE CONSTRUCTION WHICH FAVOURS THE ASSESSEE MUST BE ADOPTED. THEREFORE, WE ARE OF THE VIEW THAT DEPARTMENT MAY RECOVER THE TAXES FROM THE ASSESSEE ON THE ADDITION TO THE TUNE OF RS.14,99,663/-, WHICH IS LESS AMOUNT OUT OF TWO ALTERNATIVES, AS WORKED OUT BY LD CIT(A), BY FOLLOWING THE DUE PROCESS OF LAW. IN THIS SCENARIO, WE HAVE NO HESITATION TO PREFER TO FOLLOW THE CONCLUSION NO. 2 REACHED BY THE LD CIT(A) AND ACCORDINGLY, WE SUSTAIN THE ADDITION TO THE TUNE OF RS.14,99,663/-. 13. IN THE RESULT, APPEAL FILED BY THE REVENUE IS DISMISSED AND APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED IN ABOVE TERMS. ORDER PRONOUNCED ON 27/09/2021 BY PLACING THE RESULT ON THE NOTICE BOARD AS PER RULE 34(5) OF THE INCOME TAX (APPELLATE TRIBUNAL) RULE,1963. S SD/- SD/- (PAWAN SINGH) (DR. A.L. SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER SURAT/ / DATE:27/09/2021 DKP OUTSOURCING SR.P.S COPY OF THE ORDER FORWARDED TO 1. THE ASSESSEE 2. THE RESPONDENT 3. THE CIT(A) 4. PR.CIT 5. DR/AR, ITAT, SURAT 6. GUARD FILE BY ORDER //TRUE COPY// / / TRUE COPY / / ASSISTANT REGISTRAR/SR. PS/PS ITAT, SURAT