FALGUNI SAMIR MEHTA, MUMBAI V. ACIT-19(1), MUMBAI

ITA 1310/MUM/2023

AI Insights

The case involves Falguni Samir Mehta, the appellant, who contested the additions made to her income under section 69C of the Income Tax Act, 1961, for the assessment year 2012-13. The additions were based on the purchases of diamonds and emeralds from Rajan Gems and Shri Ganesh Gems, which were later found to be bogus entities involved in issuing accommodation entries. The appellant argued that these purchases were investments and not expenditures, and challenged the validity of the reassessment proceedings. However, the Tribunal upheld the additions, agreeing with the findings of the lower authorities that the purchases were not genuine and the reassessment was validly conducted.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 123488 (ITAT-MUMBAI)
• Duration Of Justice: 4 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-08-2023
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: F
• Next Hearing Date: 08-08-2023
• Assessment Year: 2012-2013
• Appeal Filed On: 17-04-2023
• Other Referred Cases: Mumtaz Haji Mohmad Memon v. ITO, PCIT v. Shodiman Investment (P) Ltd., N.K. Proteins Ltd. v. Dy. CIT, N.K. Industries Ltd. v. Dy. CIT, Raymond Woollen Mills Ltd. Ors v. Income Tax Officer, CIT Vs Radhika creations, Vaman International P Ltd v. PCIT
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: PRAKASH D CHOUGHULE
• Assessee Lawyers: AJAY GOSALIA ISHA SHAH
• Keywords: Reopening of assessment; Bogus purchase; Opportunity of being heard; Tangible material; Valuation report; Accommodation entries; Reason to believe; Reassessment proceedings; Borrowed satisfaction
• Section: 147; 69; 148; 132; 69C; 143(1); 250; 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “F” MUMBAI BEFORE SHRI OM PRAKASH KANT (ACCOUNTANT MEMBER) AND MS. KAVITHA RAJAGOPAL (JUDICIAL MEMBER) ITA No. 1310/MUM/2023 Assessment Year: 2012-13 Falguni Samir Mehta, 303, Mansarovar, Mount Pleasant Road, Mumbai-400006. Vs. ACIT-19(1), Room No. 203, 2 nd floor, Matru Mandir, Tardeo Road, Mumbai-400007. PAN No. ABEPS 6347 K Appellant Respondent Assessee by : Shri Ajay Gosalia / Isha Shah Revenue by : Mr. Prakash D Choughule, Sr DR Date of Hearing : 09/08/2023 Date of pronouncement : 23/08/2023 ORDER PER OM PRAKASH KANT, AM This appeal by the assessee is directed against order dated 24.02.2023 passed by the Ld. Commissioner of Income-tax – National Faceless Appeal Centre, Delhi [in short ‘the Ld. CIT(A)’] for assessment year 2012-13, raising following grounds: 1. Addition in respect of purchases of diamonds & emeralds for personal use u/69C - Rs.37.20.900 The Id. CIT(A) erred in confirming addition of Rs.37,20,900 made by the Id. ACIT ('AO') in respect of diamonds & emeralds purchased by appellant for her personal use from Rajan Gems & Shri Ganesh Gems. 2. Addition u/s 69C improper a) The Id CIT(A) erred in confirming addition made u/s 69C by the id A0 although the appellan her as investment in her balance sheet and not as expenditure in her profit and loss account. b) Without prejudice to the foregoing, he failed to appreciate that, within the meaning of sec.69C, question of explanation or that explanation offered by her being not satisfactory, also could not arise:  for payment made by her during the financial year of Rs.9,60,400, as it was paid by different cheques all of which were duly reflecte in appellant's bank account, or  for unpaid amount of Rs.27,60,500, as the same cannot be treated as expenditure at all. 3. Reopening without application of mind The Id CIT(A) erred in confirming reopening of assessment by the Id AO on the ground that app by taking accommodation entry in the form of bogus purchases, which is without application of his mind, as factually the appellant had not claimed any expenses on account of purchase as per the return of her and available on record. 4. Failure of conditions precedent to reopening a) The Id CIT(A) erred in confirming reopening of assessment and passing of reassessment order by the Id A in spite of his failure to bring on record documentary evidence showing that factually:  reasons were recorded by him prior to issue of notice u/s 148, and  satisfaction as required u/s 151(1) was obtained by him prior to issue of notice u/s 148 both which are conditions precedent to reopening. 2. Briefly stated, facts of the case are that the assessee individual filed return of income declaring total income of Rs.22,78,631/- on 30.08.2012 assessee shown income from various sources including profit from partnership firm namely M/s Essar Traders. Subsequently, a search action u/s 132 of the Income Act’) was carried out by the Investigation Wing, Mumbai on a) The Id CIT(A) erred in confirming addition made u/s 69C by the id A0 although the appellant had treated diamonds and emeralds purchased by her as investment in her balance sheet and not as expenditure in her profit and loss account. b) Without prejudice to the foregoing, he failed to appreciate that, within the meaning of sec.69C, question of failure by appellant to offer explanation or that explanation offered by her being not satisfactory, also could not arise: for payment made by her during the financial year of Rs.9,60,400, as it was paid by different cheques all of which were duly reflecte in appellant's bank account, or for unpaid amount of Rs.27,60,500, as the same cannot be treated as expenditure at all. 3. Reopening without application of mind The Id CIT(A) erred in confirming reopening of assessment by the Id AO on the ground that appellant understated her income by inflating purchases by taking accommodation entry in the form of bogus purchases, which is without application of his mind, as factually the appellant had not claimed any expenses on account of purchase as per the return of her and available on record. 4. Failure of conditions precedent to reopening a) The Id CIT(A) erred in confirming reopening of assessment and passing of reassessment order by the Id A in spite of his failure to bring on record evidence showing that factually: reasons were recorded by him prior to issue of notice u/s 148, and satisfaction as required u/s 151(1) was obtained by him prior to issue of notice u/s 148 both which are conditions precedent to reopening. stated, facts of the case are that the assessee individual filed return of income declaring total income of on 30.08.2012. In the return of income filed assessee shown income from various sources including profit from irm namely M/s Essar Traders. Subsequently, a search action u/s 132 of the Income-tax Act, 1961 (in short ‘the Act’) was carried out by the Investigation Wing, Mumbai on 1310/M/2023 2 Falguni Samir Mehta a) The Id CIT(A) erred in confirming addition made u/s 69C by the id A0 t had treated diamonds and emeralds purchased by her as investment in her balance sheet and not as expenditure in her profit b) Without prejudice to the foregoing, he failed to appreciate that, within failure by appellant to offer explanation or that explanation offered by her being not satisfactory, also for payment made by her during the financial year of Rs.9,60,400, as it was paid by different cheques all of which were duly reflected for unpaid amount of Rs.27,60,500, as the same cannot be treated The Id CIT(A) erred in confirming reopening of assessment by the Id AO on ellant understated her income by inflating purchases by taking accommodation entry in the form of bogus purchases, which is without application of his mind, as factually the appellant had not claimed income filed by a) The Id CIT(A) erred in confirming reopening of assessment and passing of reassessment order by the Id A in spite of his failure to bring on record reasons were recorded by him prior to issue of notice u/s 148, and satisfaction as required u/s 151(1) was obtained by him prior to stated, facts of the case are that the assessee, an individual filed return of income declaring total income of n the return of income filed, the assessee shown income from various sources including profit from irm namely M/s Essar Traders. Subsequently, a tax Act, 1961 (in short ‘the Act’) was carried out by the Investigation Wing, Mumbai on 03.10.2013 at the premises of Shri Gautam Jain Group. During search it was observed th family members and him, was engaged in issuing accommodation entry bills to the beneficiaries. The Investigation Wing found that Shri Gautam Jain has issued two bills amounting to Rs.17,67,500/ amounting to Rs.19,53,400/ Investigation Wing forwarded this information Officer and thus, the Assessing Officer reasons to believe that income 37,20,900/-( = Rs.17,67,500+ Rs.19,53,400) and issued notice u/s 148 of the Act on 28.03.2019 duly served upon the assessee. In response return of income electronically on 03.04.2019 declaring the same amount of income which was declared in the original return of income filed on 30.08.2012 i.e. Rs.22,78,630/ Officer provided copies of the reasons recorde thereafter providing due opportunity of being heard the assessment u/s 147 of the Act , unexplained expenditure u/s 69C of the Act amounting to Rs.37,20,900/-. 03.10.2013 at the premises of Shri Gautam Jain Group. During search it was observed that Shri Gautam Jain along with his other family members and employees, though various concerns floated by was engaged in issuing accommodation entry bills to the beneficiaries. The Investigation Wing found that Shri Gautam Jain has issued two bills through concerns namely M/s amounting to Rs.17,67,500/- and M/s Shree Ganesh Gems amounting to Rs.19,53,400/- respectively to the assessee. The Investigation Wing forwarded this information to the Assessing the Assessing Officer accordingly recorded the that income of assessee to the extent of Rs. ( = Rs.17,67,500+ Rs.19,53,400) escaped assessment and issued notice u/s 148 of the Act on 28.03.2019 the assessee. In response, the assessee filed return of income electronically on 03.04.2019 declaring the same amount of income which was declared in the original return of income filed on 30.08.2012 i.e. Rs.22,78,630/-. The Assessing copies of the reasons recorded to the assessee and thereafter providing due opportunity of being heard u/s 147 of the Act , wherein he made addition for unexplained expenditure u/s 69C of the Act amounting to 1310/M/2023 3 Falguni Samir Mehta 03.10.2013 at the premises of Shri Gautam Jain Group. During at Shri Gautam Jain along with his other employees, though various concerns floated by was engaged in issuing accommodation entry bills to the beneficiaries. The Investigation Wing found that Shri Gautam Jain M/s Rajan Gems Shree Ganesh Gems to the assessee. The to the Assessing gly recorded the of assessee to the extent of Rs. escaped assessment and issued notice u/s 148 of the Act on 28.03.2019, which was the assessee filed return of income electronically on 03.04.2019 declaring the same amount of income which was declared in the original return of . The Assessing d to the assessee and thereafter providing due opportunity of being heard, he completed wherein he made addition for unexplained expenditure u/s 69C of the Act amounting to 3. On further appeal, the Ld. C Aggrieved, the assessee is in appeal before the Tribunal by way of raising grounds as reproduced above. 4. The grounds raised by the assessee are ‘first’ category of the grounds is validity of the reassessment proceedings. In t the grounds, the assessee has challenged addition on merit. Since, the grounds challenging validity of the reassessment root of the matter, adjudication, firstly. 5. In ground No. 4, the assessee has challenged validity of the reassessment on two issues. reasons have been recorded subsequent to the issue of notice 148 of the Act. Secondly of the Act was obtained subsequent to the issue of u/s 148 of the Act. 6. We have heard rival submission of the parties on the issue in dispute and perused the relevant material on re Counsel of the assessee referred to Paper Book Page 1 which is a copy of the notice u/s 148 of the Act issued by the Assessing Officer. This notice has been issued on 28.03.2019. Further, the Ld. Counsel of the assessee referred to Paper Book copy of the reasons record On further appeal, the Ld. CIT(A) also upheld the addition. Aggrieved, the assessee is in appeal before the Tribunal by way of raising grounds as reproduced above. The grounds raised by the assessee are of two categories. The category of the grounds is where the assessee h f the reassessment proceedings. In the ‘second the assessee has challenged addition on merit. Since, the grounds challenging validity of the reassessment therefore, we are taking those In ground No. 4, the assessee has challenged validity of the reassessment on two issues. Firstly, according to the assessee have been recorded subsequent to the issue of notice Secondly, sanction/approval as required u/s 151(1) of the Act was obtained subsequent to the issue of u/s 148 of the We have heard rival submission of the parties on the issue in dispute and perused the relevant material on re Counsel of the assessee referred to Paper Book Page 1 which is a copy of the notice u/s 148 of the Act issued by the Assessing Officer. This notice has been issued on 28.03.2019. Further, the Ld. Counsel of the assessee referred to Paper Book page 3 which copy of the reasons record, which were provided to the assessee 1310/M/2023 4 Falguni Samir Mehta IT(A) also upheld the addition. Aggrieved, the assessee is in appeal before the Tribunal by way of two categories. The assessee has challenged second’ category of the assessee has challenged addition on merit. Since, the grounds challenging validity of the reassessment goes to the those grounds for In ground No. 4, the assessee has challenged validity of the , according to the assessee, have been recorded subsequent to the issue of notice u/s , sanction/approval as required u/s 151(1) of the Act was obtained subsequent to the issue of u/s 148 of the We have heard rival submission of the parties on the issue in dispute and perused the relevant material on record. The Ld. Counsel of the assessee referred to Paper Book Page 1 which is a copy of the notice u/s 148 of the Act issued by the Assessing Officer. This notice has been issued on 28.03.2019. Further, the Ld. page 3 which is a provided to the assessee vide letter dated 16.04.2019. In view of this letter of the assessee submitted that reasons have been recorded on 16.04.2019, whereas notice u/s 148 of the 28.03.2019 , therefore, notice issued reasons ,hence same is invalid. In this regard, the ld. DR filed a copy of reasons recorded along with approved by the appropriate a such proforma was also provided to the ld counsel of assessee. proforma was forwarded by the Assessing Officer the Range Officer, who Mumbai on 25.03.2019. A scan copy of the relevant reproduced as under: vide letter dated 16.04.2019. In view of this letter, the Ld. Counsel of the assessee submitted that reasons have been recorded on whereas notice u/s 148 of the Act has been issued on therefore, notice issued being prior to recording of the same is invalid. In this regard, the ld. DR filed a copy of reasons recorded along with proforma of reasons the appropriate authority u/s 151 of the Act was also provided to the ld counsel of assessee. was forwarded by the Assessing Officer on 22.03.2019 to the Range Officer, who in turn further forwarded to the Pr. CIT 2019. A scan copy of the relevant reproduced as under: 1310/M/2023 5 Falguni Samir Mehta the Ld. Counsel of the assessee submitted that reasons have been recorded on Act has been issued on prior to recording of the same is invalid. In this regard, the ld. DR filed a of reasons to believe uthority u/s 151 of the Act. A copy of was also provided to the ld counsel of assessee. This on 22.03.2019 to further forwarded to the Pr. CIT-19, 2019. A scan copy of the relevant proforma is 6.1 After obtaining approval of the appropriate authority prescribed proforma, the Assessing Officer issued notice u/s 148 of the Act. In view of the above factual information reasons have been recorded by the Assessing Officer 22/3/2019 i.e. prior to issue of the notice u/s 148 of the Act 28/03/2019. This fact was duly accepted by the Ld Counsel of assessee during the hearing. 6.2 Regarding the challenge of approval recorded, we find from the Pr. CIT-19, Mumbai has approved the reasons recorded 25/03/2019, which is 28/03/2019, therefore the assessee on this co 6.3 The objections of the assessee for issue of notice u/s 148 of the Act are without any basis and proper verification of the facts. Since, the notice u/s 148 of the reasons to belief and appropriate authority, therefore illegality in issuing notice u/s 148 of the Act. The ground No. 4 of the appeal of the assessee is accordingly dismissed. 7. In ground No. 3, the assessee has challenged the reasons recorded on the ground that the Assessing Officer has not applied mind while recording the reasons After obtaining approval of the appropriate authority , the Assessing Officer issued notice u/s 148 of the Act. In view of the above factual information, it is evident that reasons have been recorded by the Assessing Officer prior to issue of the notice u/s 148 of the Act This fact was duly accepted by the Ld Counsel of assessee during the hearing. ing the challenge of approval granted for reasons from the Performa reproduced above 19, Mumbai has approved the reasons recorded which is prior to issue of notice u/s 148 of the Act ore, the objection raised by the Ld. Counsel of on this count also failed. The objections of the assessee for issue of notice u/s 148 of are without any basis and proper verification of the facts. Since, the notice u/s 148 of the Act has been issued after recording reasons to belief and after obtaining due sanctions/approval of the authority, therefore, we do not find any in issuing notice u/s 148 of the Act. The ground No. 4 of the assessee is accordingly dismissed. In ground No. 3, the assessee has challenged the reasons recorded on the ground that the Assessing Officer has not applied while recording the reasons. The Ld. Counsel of the assessee 1310/M/2023 6 Falguni Samir Mehta After obtaining approval of the appropriate authority in , the Assessing Officer issued notice u/s 148 of it is evident that reasons have been recorded by the Assessing Officer on or before prior to issue of the notice u/s 148 of the Act dated This fact was duly accepted by the Ld Counsel of granted for reasons reproduced above shows that 19, Mumbai has approved the reasons recorded on u/s 148 of the Act on , the objection raised by the Ld. Counsel of The objections of the assessee for issue of notice u/s 148 of are without any basis and proper verification of the facts. Act has been issued after recording due sanctions/approval of the , we do not find any irregularity or in issuing notice u/s 148 of the Act. The ground No. 4 of In ground No. 3, the assessee has challenged the reasons recorded on the ground that the Assessing Officer has not applied he Ld. Counsel of the assessee submitted that the AO accommodation entry of bogus not claimed any expense on account of purchase as of income filed, which was the assessee referred to Paper Book page 40 to 42 which is the relevant part of the return of income containing details of the profit and loss account. The Ld. Counsel submitted that in the return of income no purchases have been recorded and therefore the reason to believe that income escaped factual understanding and of non-application of the mind to the ld Counsel, the entire reassessment proceedings vitiates to non application of mind by the contention, the Ld. Counsel of the assessee relied on the decision in the case of Mumtaz Haji Mohmad Memon v. ITO (2018) 408 ITR 268 (Guj.). He further relied on the decision of the Hon’ble Gujarat High Court in the case of ITR 335 (Guj.) , wherein it is held that one of the reasons for reopening reassessment proceedings cannot survive. The Ld. Counsel also relied on the decision of the Hon’ble Bombay High Court in the case of PCIT v. Shodiman Investment (P) Ltd. (2018) 167 DTR (Bom) 290, wherein it is held that not mandate of the law. submitted that the AO has recorded that assessee accommodation entry of bogus purchase, whereas the assessee has not claimed any expense on account of purchase as , which was available on record. The Ld. Counsel of the assessee referred to Paper Book page 40 to 42 which is the relevant part of the return of income containing details of the profit and loss account. The Ld. Counsel submitted that in the return of ses have been recorded and therefore the reason that income escaped assessment is based on the wrong factual understanding and thus, those reasons recorded application of the mind by the Assessing Officer he entire reassessment proceedings vitiates to non application of mind by the Assessing officer. I contention, the Ld. Counsel of the assessee relied on the decision in Mumtaz Haji Mohmad Memon v. ITO (2018) 408 ITR e further relied on the decision of the Hon’ble Gujarat High Court in the case of Sagar Enterprises v. ACIT (2002) 257 wherein it is held that where incorrect facts one of the reasons for reopening, it cannot be said that i reassessment proceedings cannot survive. The Ld. Counsel also relied on the decision of the Hon’ble Bombay High Court in the case PCIT v. Shodiman Investment (P) Ltd. (2018) 167 DTR (Bom) it is held that reopening on borrowed not mandate of the law. 1310/M/2023 7 Falguni Samir Mehta has recorded that assessee taken whereas the assessee has not claimed any expense on account of purchase as per the return available on record. The Ld. Counsel of the assessee referred to Paper Book page 40 to 42 which is the relevant part of the return of income containing details of the profit and loss account. The Ld. Counsel submitted that in the return of ses have been recorded and therefore the reason based on the wrong those reasons recorded are result by the Assessing Officer. According he entire reassessment proceedings vitiates due ssessing officer. In support of contention, the Ld. Counsel of the assessee relied on the decision in Mumtaz Haji Mohmad Memon v. ITO (2018) 408 ITR e further relied on the decision of the Hon’ble Gujarat Sagar Enterprises v. ACIT (2002) 257 incorrect facts being it cannot be said that initiated reassessment proceedings cannot survive. The Ld. Counsel also relied on the decision of the Hon’ble Bombay High Court in the case PCIT v. Shodiman Investment (P) Ltd. (2018) 167 DTR (Bom) borrowed satisfaction is 7.1 We have heard rival submission of the parties and perused the relevant material on record. The reasons recorded by the Assessing Officer are placed on paper book page reasons recorded has reference said reasons are Name of the Assessee Status PAN A.Y. Reasons for re Tax, Act. The assessee, Falguni Samir Mehta (PAN: ABEPS6347K) had filed the return of income for A.Y. of Rs. 22,78,631/ 1961. Information has been received in this case from the Office of the DGIT(In.), Mumbai, which has been gathered during search operation u/s.132 of the Income Tax Act, 1961, on certain persons belonging to Shri Gautam Jain and his group that the assessee has t accommodation entries of bogus purchase from certain parties belonging to Shri Gautam Jain and his group. Shri Gautam Jain in his statement on oath u/s 132(4) has admitted that all the concerns belonging to his group were engaged in giving accommodati the parties of the nature of loans and purchases. M/s Rajan Gems and M/s Shree Ganesh Gems are the parties belonging to Shri Gautam Jain and is controlled by him and he has in his statement on oath admitted that the concern M/s Rajan Gems and to his group. The details of party/parties belonging to Gautam Jain group from whom the assessee had taken accommodation entries in F.Y. 2011-12 relevant to A.Y. 2012 Sr. No Name of the entry provider Co 1. Rajan Gems 2. Shree Ganesh Gems Total We have heard rival submission of the parties and perused the relevant material on record. The reasons recorded by the Assessing on paper book page-3. A legible copy of the reasons recorded has also been provided by the Ld. DR reference said reasons are extracted as under: “ANNEXURE Name of the Assessee Falguni Samir Mehta Individual ABEPS6347K 2012-13 Reasons for re-opening of the assessment u/s. 147 of the Income The assessee, Falguni Samir Mehta (PAN: ABEPS6347K) had filed the return of income for A.Y. 2012-13 on 30.08.2012 declaring total income of Rs. 22,78,631/- which was processed u/s. 143(1) of the Information has been received in this case from the Office of the DGIT(In.), Mumbai, which has been gathered during search operation u/s.132 of the Income Tax Act, 1961, on certain persons belonging to Shri Gautam Jain and his group that the assessee has t accommodation entries of bogus purchase from certain parties belonging to Shri Gautam Jain and his group. Shri Gautam Jain in his statement on oath u/s 132(4) has admitted that all the concerns belonging to his group were engaged in giving accommodati the parties of the nature of loans and purchases. M/s Rajan Gems and M/s Shree Ganesh Gems are the parties belonging to Shri Gautam Jain and is controlled by him and he has in his statement on oath admitted that the concern M/s Rajan Gems and M/s Shree Ganesh Gems belong to his group. The details of party/parties belonging to Gautam Jain group from whom the assessee had taken accommodation entries in 12 relevant to A.Y. 2012-13 is/are as follows:- Name of the entry provider Concern Amount of bogus sales made to assesses Rajan Gems 17,67,500/- Shree Ganesh Gems 19,53,400/- 37,20,900/- 1310/M/2023 8 Falguni Samir Mehta We have heard rival submission of the parties and perused the relevant material on record. The reasons recorded by the Assessing . A legible copy of the o been provided by the Ld. DR. For ready opening of the assessment u/s. 147 of the Income The assessee, Falguni Samir Mehta (PAN: ABEPS6347K) had filed the 13 on 30.08.2012 declaring total income which was processed u/s. 143(1) of the I.T. Act, Information has been received in this case from the Office of the DGIT(In.), Mumbai, which has been gathered during search operation u/s.132 of the Income Tax Act, 1961, on certain persons belonging to Shri Gautam Jain and his group that the assessee has taken accommodation entries of bogus purchase from certain parties belonging to Shri Gautam Jain and his group. Shri Gautam Jain in his statement on oath u/s 132(4) has admitted that all the concerns belonging to his group were engaged in giving accommodation entries to the parties of the nature of loans and purchases. M/s Rajan Gems and M/s Shree Ganesh Gems are the parties belonging to Shri Gautam Jain and is controlled by him and he has in his statement on oath admitted M/s Shree Ganesh Gems belong to his group. The details of party/parties belonging to Gautam Jain group from whom the assessee had taken accommodation entries in Amount of bogus sales made to The above chart shows that the assessee had taken accommodation entries to the tune of Rs. 37,20,900/ 2011-12 relevant to the A.Y. 2012 received from the DIT (In) and after due application of mind to the same, it appears that the assessee has understated its income by Rs 37,20,900/- by inflating its purchase by taki the form of bogus purchase. Accordingly, on application of mind to this tangible material on record, I have reason to believe that an amount of Rs 37,20,900/ for AY 2012-13 by v genuine purchase transaction, the assessee has failed to disclose fully and truly all material facts necessary for his assessment for the assessment year under consideration, coming within the meaning of the provisions of section 147 of the Income 7.2 On perusal of the reasons recorded, it is evident that the Assessing Officer has mentioned the sales bills issued by the firms controlled by Shri Gautam Jain. The Assessing Officer has properly referred the name of the concern assessee. This fact has not Officer has recorded that sales issued by those firms nature of the purchase of information received Thus, we do not find any factual error in the reasons recorded by the Ld. Assessing Officer said purchase was not part of profit and loss acc reported as item of personal asset in the return of income filed. But , we find that the AO has nowhere stated that that said purchase had been entered by the assessee in profit and loss account. Therefore, allegations of non Assessing Officer are without any basis. Accordingly, the ratio of the decisions relied upon by the assessee are not applicable over the facts of the instant case. Further, the Hon’ble Supreme Court in the The above chart shows that the assessee had taken accommodation entries to the tune of Rs. 37,20,900/- from the above parties in 12 relevant to the A.Y. 2012-13. I have perused the information received from the DIT (In) and after due application of mind to the same, it appears that the assessee has understated its income by Rs by inflating its purchase by taking accommodation entry in the form of bogus purchase. Accordingly, on application of mind to this tangible material on record, I have reason to believe that an amount of Rs 37,20,900/- has escaped assessment in the hands of the assessee 13 by virtue of reflecting this bogus transaction as a genuine purchase transaction, the assessee has failed to disclose fully and truly all material facts necessary for his assessment for the assessment year under consideration, coming within the meaning of the provisions of section 147 of the Income-tax Act 1961.” On perusal of the reasons recorded, it is evident that the Assessing Officer has mentioned the sales bills issued by the firms controlled by Shri Gautam Jain. The Assessing Officer has properly erred the name of the concerns, who has issued sales bills to the has not been disputed. Further, the Assessing Officer has recorded that sales issued by those firms nature of the purchase in the hands of the assessee, of information received, was in the nature of accommodation entry. e do not find any factual error in the reasons recorded by the Ld. Assessing Officer. The ld counsel has submitted that the said purchase was not part of profit and loss account and it was reported as item of personal asset in the return of income filed. But , we find that the AO has nowhere stated that that said purchase had been entered by the assessee in profit and loss account. herefore, allegations of non-application of the mind by the Assessing Officer are without any basis. Accordingly, the ratio of the decisions relied upon by the assessee are not applicable over the facts of the instant case. Further, the Hon’ble Supreme Court in the 1310/M/2023 9 Falguni Samir Mehta The above chart shows that the assessee had taken accommodation from the above parties in F.Y. 13. I have perused the information received from the DIT (In) and after due application of mind to the same, it appears that the assessee has understated its income by Rs ng accommodation entry in the form of bogus purchase. Accordingly, on application of mind to this tangible material on record, I have reason to believe that an amount of has escaped assessment in the hands of the assessee irtue of reflecting this bogus transaction as a genuine purchase transaction, the assessee has failed to disclose fully and truly all material facts necessary for his assessment for the assessment year under consideration, coming within the meaning of the On perusal of the reasons recorded, it is evident that the Assessing Officer has mentioned the sales bills issued by the firms controlled by Shri Gautam Jain. The Assessing Officer has properly sales bills to the disputed. Further, the Assessing Officer has recorded that sales issued by those firms were in the in the hands of the assessee, which in view in the nature of accommodation entry. e do not find any factual error in the reasons recorded by . The ld counsel has submitted that the ount and it was reported as item of personal asset in the return of income filed. But , we find that the AO has nowhere stated that that said purchase had been entered by the assessee in profit and loss account. the mind by the Assessing Officer are without any basis. Accordingly, the ratio of the decisions relied upon by the assessee are not applicable over the facts of the instant case. Further, the Hon’ble Supreme Court in the case of Raymond Woollen Mills Ltd Ors, [1999] 236 ITR correctness or sufficiency of the reasons recorded at the stage of initiation of reassessment proceedings. In view of the above, the ground No. 3 of 8. The ground Nos. Rs.37,20,900/- as unexplained expenditure under section 69C of the Act for purchase of diamond and emerald. 8.1 The briefly stated facts qua issue in dispute course of search at the premises of 03/10/2013 ,the Investigation wing of the I Mumbai noticed that he was engaged accommodation entry bills. The investigation wing informed the Assessing Officer that assessee had taken two such accommodation entries of purchase from concerns controlled by namely “M/s Rajan Gems “Shri Ganesh Gems” Officer in the assessment order has recorded various facts observed during the course of the search. He has noted that directors/partners/proprietors of various concerns operated by Sh. Gautam Jain were either personally and all those persons in their respective statements admitted to be dummy/ namesake Most of those persons were eng Raymond Woollen Mills Ltd. Vs. Income Tax Officer and ITR 34(SC), (2008) 14 SCC 218 correctness or sufficiency of the reasons recorded is the stage of initiation of reassessment proceedings. In view of the above, the ground No. 3 of the appeal of the assessee is dismissed. The ground Nos. 1 and 2 of the appeal relate to addition of as unexplained expenditure under section 69C of the Act for purchase of diamond and emerald. The briefly stated facts qua issue in dispute course of search at the premises of “Sh Gautam Jain 03/10/2013 ,the Investigation wing of the Income- noticed that he was engaged in issuing bogus accommodation entry bills. The investigation wing informed the Assessing Officer that assessee had taken two such accommodation purchase from concerns controlled by Sh Rajan Gems” amounting to ₹17,67,50 ” amounting to Rs.19,53,400/- Officer in the assessment order has recorded various facts observed during the course of the search. He has noted that directors/partners/proprietors of various concerns operated by Sh. Gautam Jain were either his family friends or known to him personally and all those persons in their respective statements admitted to be dummy/ namesake directors/partner/ those persons were engaged either in depositing cheques 1310/M/2023 10 Falguni Samir Mehta . Vs. Income Tax Officer and 34(SC), (2008) 14 SCC 218 has held that is not to be seen the stage of initiation of reassessment proceedings. In view of the the appeal of the assessee is dismissed. ppeal relate to addition of as unexplained expenditure under section 69C of The briefly stated facts qua issue in dispute are that in the Sh Gautam Jain” group, on -tax Department in issuing bogus accommodation entry bills. The investigation wing informed the Assessing Officer that assessee had taken two such accommodation Sh Gautam Jain, 500/- and M/s -. The Assessing Officer in the assessment order has recorded various facts observed during the course of the search. He has noted that directors/partners/proprietors of various concerns operated by Sh. or known to him personally and all those persons in their respective statements directors/partner/proprietors. aged either in depositing cheques in the bank, handing over etc. Those persons were not having any genuine knowledge of the business activity recorded in those concerns. All those persons were in receipt of salary from Sri Gautam Jain. Further the Assessing Officer has noted that all those empl house/flat owned by the Sh Gautam Jain those concerns were Jain and his family members. During the course of the search at none of those premises any stock diamond was found. Further, during the course of proceeding, Sh Gautam Jain himself admitted to be engaged in the business of providing accommodation entry of bogus sales through concerns managed by him. In view of the Assessing Officer ask two purchases i.e. Rajan Gems amounting to Shree Ganesh Gems amounting to Rs. Officer rejected the contention of the “12. The assessee tried to substantiate his claim as to genuineness of the impugned purchases with the help of book entries and documents prepared by itself. Making of entries in his books of accounts and related documentation acts of the assessee, which cannot be taken as conclusive evidence especially when contrary evidences are on records in the form of findings of investigation wing showing the sellers as the bogus entities. Considering the detail investi search, it is held that the seller entities were bogus ones. It is settled principle that mere documentation, either in form of bank account entries or otherwise, of a claimed transaction cannot make a fictitious transaction a real on assessee to prove her claim. In the failed to do so, the preponderance of probability entirely goes against the assessee. handing over parcels/letter to clients, making data entry . Those persons were not having any genuine knowledge of the business activity recorded in those concerns. All those persons were in receipt of salary from Sri Gautam Jain. Further the Assessing Officer has noted that all those employee(s) were residing in the house/flat owned by the Sh Gautam Jain and the office addres also in the premises belonging to Sh Gautam Jain and his family members. During the course of the search at none of those premises any stock of rough or cut and polished diamond was found. Further, during the course of Sh Gautam Jain himself admitted to be engaged in the business of providing accommodation entry of bogus sales through concerns managed by him. In view of the observations, the Assessing Officer asked the assessee to justify genuineness of two purchases i.e. Rajan Gems amounting to ₹17,67, ee Ganesh Gems amounting to Rs.19,53,400/-. The Assessing Officer rejected the contention of the assessee observing as under: The assessee tried to substantiate his claim as to genuineness of the impugned purchases with the help of book entries and documents prepared by itself. Making of entries in his books of accounts and related documentation are only unilateral acts of the assessee, which cannot be taken as conclusive evidence especially when contrary evidences are on records in the form of findings of investigation wing showing the sellers as the bogus entities. Considering the detail investigation and outcome of search, it is held that the seller entities were bogus ones. It is settled principle that mere documentation, either in form of bank account entries or otherwise, of a claimed transaction cannot make a fictitious transaction a real one. The onus is on the assessee to prove her claim. In the instant case as the assessee failed to do so, the preponderance of probability entirely goes against the assessee. 1310/M/2023 11 Falguni Samir Mehta s, making data entry . Those persons were not having any genuine knowledge of the business activity recorded in those concerns. All those persons were in receipt of salary from Sri Gautam Jain. Further the Assessing were residing in the the office addres(s) of also in the premises belonging to Sh Gautam Jain and his family members. During the course of the search at rough or cut and polished diamond was found. Further, during the course of search Sh Gautam Jain himself admitted to be engaged in the business of providing accommodation entry of bogus sales through observations, the Ld. the assessee to justify genuineness of those 17,67,500/-and M/s . The Assessing assessee observing as under: The assessee tried to substantiate his claim as to genuineness of the impugned purchases with the help of book entries and documents prepared by itself. Making of entries in his are only unilateral acts of the assessee, which cannot be taken as conclusive evidence especially when contrary evidences are on records in the form of findings of investigation wing showing the sellers as the gation and outcome of search, it is held that the seller entities were bogus ones. It is settled principle that mere documentation, either in form of bank account entries or otherwise, of a claimed transaction cannot e. The onus is on the instant case as the assessee failed to do so, the preponderance of probability entirely goes 13. The value/price of the diamond depends upon three aspects i.e. carat and size, by the assessee does not contains these basic details, thereofre, the purchases made from these bogus parties are treated as bogus. 13.1 In the event of purchase being made from an alleged bogus party and bills being possibility of over invoicing of the materials purchased to reduce the profits cannot be ruled out. 14. From the circumstantial evidence collected through the various facts and corroborative evidence in form of statements of the commission agents through which bogus bills were collected it is clear that the assessee has indulged in purchases through bogus bills. This issue has been in the fray for long and has seen the face of Hon. Apex Court also. The observation of the Hon’bl Supreme Court in the case of N.K> Protiens Ltd. v. Dy. CIT 2017 Tax Pub(DT) 1860 (SC) ; (2017) 250 TAXMAN 0022 is very relevant here – the judgment of the Gujarat High Court in N.K Industries Ltd. v. Dy. CIT (2016) 292 CTR (Guj) 354, whereby it was held that addition on basis of undisclosed income could not be restricted to certain percentage when the entire transaction was found as bogus, the Supreme Court dismissed the SLP. Assessee filed SLP to Appeal against the judgment of the Gujarat High Court in N.K. Industries Ltd. v. Dy. CIT (2016) 292 CTR (Guj) 354, whereby it was held that addition on basis of undisclosed income could not be restricted to certain percentage when the entire transaction was found as SLP. 15. Therefore, on the basis of the findings of the facts as discussed above and also following the spirit of the judgment of the Hon’ble High Court which was later confirmed by the Hon’ble Apex Court and assessee is rejected and the impugned purchases of Rs.37,20,900/- assessee for assessment year 2012 8.2 On further appeal, the Ld. CIT(A) also upheld the ad made by the Assessing Officer 8.3 Before us, the learned counsel of the assessee referred to the paper book containing pages 1 to 81 filed by the assessee and submitted that firstly The value/price of the diamond depends upon three aspects i.e. carat and size, colour and clarity. The bills produced by the assessee does not contains these basic details, thereofre, the purchases made from these bogus parties are treated as In the event of purchase being made from an alleged bogus party and bills being taken from another party the possibility of over invoicing of the materials purchased to reduce the profits cannot be ruled out. From the circumstantial evidence collected through the various facts and corroborative evidence in form of statements of he commission agents through which bogus bills were collected it is clear that the assessee has indulged in purchases through bogus bills. This issue has been in the fray for long and has seen the face of Hon. Apex Court also. The observation of the Hon’bl Supreme Court in the case of N.K> Protiens Ltd. v. Dy. CIT 2017 Tax Pub(DT) 1860 (SC) ; (2017) 250 TAXMAN 0022 is very – Where the assessee filed SLP to appeal against the judgment of the Gujarat High Court in N.K Industries Ltd. v. (2016) 292 CTR (Guj) 354, whereby it was held that addition on basis of undisclosed income could not be restricted to certain percentage when the entire transaction was found as bogus, the Supreme Court dismissed the SLP. Assessee filed SLP nst the judgment of the Gujarat High Court in N.K. Industries Ltd. v. Dy. CIT (2016) 292 CTR (Guj) 354, whereby it was held that addition on basis of undisclosed income could not be restricted to certain percentage when the entire transaction was found as bogus. The Hon’ble Supreme Court dismissed the Therefore, on the basis of the findings of the facts as discussed above and also following the spirit of the judgment of the Hon’ble High Court which was later confirmed by the Hon’ble Apex Court and considering all the circumstances, claim of the assessee is rejected and the impugned purchases of - is added u/s 69C to the total income of the assessee for assessment year 2012-13.” urther appeal, the Ld. CIT(A) also upheld the ad made by the Assessing Officer us, the learned counsel of the assessee referred to the containing pages 1 to 81 filed by the assessee and firstly the purchase of diamonds and emerald 1310/M/2023 12 Falguni Samir Mehta The value/price of the diamond depends upon three colour and clarity. The bills produced by the assessee does not contains these basic details, thereofre, the purchases made from these bogus parties are treated as In the event of purchase being made from an alleged taken from another party the possibility of over invoicing of the materials purchased to reduce From the circumstantial evidence collected through the various facts and corroborative evidence in form of statements of he commission agents through which bogus bills were collected it is clear that the assessee has indulged in purchases through bogus bills. This issue has been in the fray for long and has seen the face of Hon. Apex Court also. The observation of the Hon’ble Supreme Court in the case of N.K> Protiens Ltd. v. Dy. CIT 2017 Tax Pub(DT) 1860 (SC) ; (2017) 250 TAXMAN 0022 is very Where the assessee filed SLP to appeal against the judgment of the Gujarat High Court in N.K Industries Ltd. v. (2016) 292 CTR (Guj) 354, whereby it was held that addition on basis of undisclosed income could not be restricted to certain percentage when the entire transaction was found as bogus, the Supreme Court dismissed the SLP. Assessee filed SLP nst the judgment of the Gujarat High Court in N.K. Industries Ltd. v. Dy. CIT (2016) 292 CTR (Guj) 354, whereby it was held that addition on basis of undisclosed income could not be restricted to certain percentage when the entire transaction bogus. The Hon’ble Supreme Court dismissed the Therefore, on the basis of the findings of the facts as discussed above and also following the spirit of the judgment of the Hon’ble High Court which was later confirmed by the Hon’ble considering all the circumstances, claim of the assessee is rejected and the impugned purchases of is added u/s 69C to the total income of the urther appeal, the Ld. CIT(A) also upheld the addition us, the learned counsel of the assessee referred to the containing pages 1 to 81 filed by the assessee and diamonds and emerald in dispute was for personal u jewelry account and not for trading (PB balance of jewelry account of balance sheet available on paperbook page to paper book pages- included in the wealth tax return on the basis of registered value 8.4 Secondly, he referred to Ganesh Gems available in paper book no finding by the lower by any of those suppliers to the assessee. He also submitted that no adverse inference has been drawn by the VAT authorities of either of those parti expenditure is accounted in regular books of accounts, it cannot be said that its source case of CIT Vs Radhika creations 8.5 The learned counsel of the submitted contradiction in the finding of the Assessing Officer has recorded as all concern of Gautam Jain group operated only from three specified premises, whereas Rajan Gems and Shri Ganesh Gems did not operate from those places as can be seen from the respective bills (PB 15 &21). He also referred to the observation of the Assessing Officer engaged in importing of diamond for personal use for making jewelry and debited to jewelry account and not for trading (PB-27). He submitted that balance of jewelry account of ₹46,35,145.33 was appearing in the balance sheet available on paperbook page-13. Further -31 and 32 and submitted that jewelry was duly included in the wealth tax return for the year under consideration on the basis of registered valuer certificate. he referred to bills issued by Rajan Gems h Gems available in paper book and submitted that there is lower authorities that cash having been returned by any of those suppliers to the assessee. He also submitted that no adverse inference has been drawn by the VAT authorities either of those parties. In support of the proposition that when expenditure is accounted in regular books of accounts, it cannot be is not explained, relied on the decision in the Radhika creations (2010) 47 DTR 60 (Del) The learned counsel of the submitted that there were contradiction in the finding of the Assessing Officer has recorded as all concern of Gautam Jain group operated only from three specified premises, whereas Rajan Gems and Shri s did not operate from those places as can be seen from the respective bills (PB 15 &21). He also referred to the observation of the Assessing Officer that Gautam Jain Group was engaged in importing of diamond and submitted that 1310/M/2023 13 Falguni Samir Mehta for making jewelry and debited to 27). He submitted that 145.33 was appearing in the 13. Further, he referred jewelry was duly for the year under consideration issued by Rajan Gems and submitted that there is authorities that cash having been returned by any of those suppliers to the assessee. He also submitted that no adverse inference has been drawn by the VAT authorities in respect es. In support of the proposition that when expenditure is accounted in regular books of accounts, it cannot be s not explained, relied on the decision in the (2010) 47 DTR 60 (Del). that there were contradiction in the finding of the Assessing Officer, firstly that he has recorded as all concern of Gautam Jain group operated only from three specified premises, whereas Rajan Gems and Shri s did not operate from those places as can be seen from the respective bills (PB 15 &21). He also referred to the that Gautam Jain Group was and submitted that in such a case purchases from those concerns The learned counsel also doubted the finding of the Assessing Officer that there was no stock a concerns. He also submitted that transaction took place prior to 2 years from the search and therefore it is not relevant that there was no stock as on the date of the search. In support of the proposition that addition under section on the basis of investigation report the decision of Hon’ble Bombay High Court in the case of Vaman International P Ltd (2020) 422 ITR 520 (Bom). 8.6 Alternatively, without prejudice submitted that addition under section ₹9,60,400/- as that is the only payment made during the financial year to Sh Ganesh Gems and no payment was made to Rajan Gems ( PB 16 & 22). 8.7 The Learned Departmental Representative referred to paperbook page name of Rajan Gems and submitted that in the said bill green emerald has been sold by way of g computed per grams, whereas emerald are never sold in grams. He referred to the page 16 which books of assessee and submitted that total sale value in the bill dated 16/09/2011 is of have been paid as those concerns cannot be presumed to be bogus. The learned counsel also doubted the finding of the Assessing fficer that there was no stock as on the date in those two concerns. He also submitted that transaction took place prior to 2 arch and therefore it is not relevant that there was no stock as on the date of the search. In support of the proposition that addition under section 69C of the Act cannot be made merely on the basis of investigation report, the learned counsel relied on he decision of Hon’ble Bombay High Court in the case of Vaman International P Ltd (2020) 422 ITR 520 (Bom). Alternatively, without prejudice. the learned counsel submitted that addition under section 69 should be restricted to hat is the only payment made during the financial year to Sh Ganesh Gems and no payment was made to Rajan Gems Learned Departmental Representative on the other han referred to paperbook page-15, which is a copy of bill issued in the name of Rajan Gems and submitted that in the said bill green merald has been sold by way of grams and rate has also been grams, whereas emerald are never sold in grams. He referred to the page 16 which is ledger account of said party in the books of assessee and submitted that total sale value in the bill dated 16/09/2011 is of ₹17,67,500/-, which has been claimed to have been paid as ₹17,500/- on 26/09/2013, Rs.5, 1310/M/2023 14 Falguni Samir Mehta cannot be presumed to be bogus. The learned counsel also doubted the finding of the Assessing s on the date in those two concerns. He also submitted that transaction took place prior to 2 arch and therefore it is not relevant that there was no stock as on the date of the search. In support of the proposition ct cannot be made merely , the learned counsel relied on he decision of Hon’ble Bombay High Court in the case of PCIT Vs Vaman International P Ltd (2020) 422 ITR 520 (Bom). the learned counsel should be restricted to hat is the only payment made during the financial year to Sh Ganesh Gems and no payment was made to Rajan Gems on the other hand , which is a copy of bill issued in the name of Rajan Gems and submitted that in the said bill green rams and rate has also been grams, whereas emerald are never sold in grams. He is ledger account of said party in the books of assessee and submitted that total sale value in the bill , which has been claimed to on 26/09/2013, Rs.5,50,000/- on 14/03/2014 and balance pointed out that no party will keep the payment outstanding unless the buyer is known, but had the party known to assessee, she would have produced him for verification before the Assessing Officer. Since he failed to produce to establish that said purchase is not genuine. The learned DR referred to page 21 of the paperbook, which is a c in the name of Shri Ganesh Gems. In the bill diamonds are shown to ha any justification. The learned DR referred that ₹9,60,400/- in the year under consideration to said party and balance has been shown to have been paid on 01/08/2013, which is not possib the assessee. But the assessee failed to produce the said party for verification before the Assessing Officer. Regarding the entry in the books of accounts of the assessee as investment and entry in the wealth tax return filed, the learned DR submitted that registered valuer certificate issued by sh Karan K Gandhi filed alongwith wealth tax return ( PB containing said ‘diamond and emerald’ was in existence but the bills showing the pur genuine, only inference which could be drawn is that those items had been purchased in cash from grey market and source of that cash has not been explained by the assessee , thus, addition by the AO is justified. 14/03/2014 and balance ₹12,00,000/- on 20/05/2014. The DR pointed out that no party will keep the payment outstanding unless the buyer is known, but had the party known to assessee, she would have produced him for verification before the Assessing Officer. Since he failed to produce said party for verification, it goes to establish that said purchase is not genuine. The learned DR referred to page 21 of the paperbook, which is a copy of bill issued in the name of Shri Ganesh Gems. In the bill, cut and polished shown to have been sold at different rates any justification. The learned DR referred that in the year under consideration has only and balance has been shown to have been paid on 01/08/2013, which is not possible unless the party the assessee. But the assessee failed to produce the said party for verification before the Assessing Officer. Regarding the entry in the books of accounts of the assessee as investment and entry in the led, the learned DR submitted that registered valuer certificate issued by sh Karan K Gandhi filed alongwith wealth tax return ( PB-35) establish that jewellary containing said ‘diamond and emerald’ was in existence but the bills showing the purchase of diamond and emerald not being genuine, only inference which could be drawn is that those items had been purchased in cash from grey market and source of that cash has not been explained by the assessee , thus, addition by the 1310/M/2023 15 Falguni Samir Mehta on 20/05/2014. The DR pointed out that no party will keep the payment outstanding unless the buyer is known, but had the party known to assessee, she would have produced him for verification before the Assessing said party for verification, it goes to establish that said purchase is not genuine. The learned DR opy of bill issued cut and polished at different rates without any justification. The learned DR referred that payment of only been shown and balance has been shown to have been paid on le unless the party was known to the assessee. But the assessee failed to produce the said party for verification before the Assessing Officer. Regarding the entry in the books of accounts of the assessee as investment and entry in the led, the learned DR submitted that in view of registered valuer certificate issued by sh Karan K Gandhi filed 35) establish that jewellary containing said ‘diamond and emerald’ was in existence but the chase of diamond and emerald not being genuine, only inference which could be drawn is that those items had been purchased in cash from grey market and source of that cash has not been explained by the assessee , thus, addition by the 8.8 We have heard rival submission of the parties on the issue in dispute and perused the relevant material on record. has shown to have made purchase of emerald of Rs.17,67,500/- Rs.19,53,400/- from M/s Shri Ganesh Gems. The Assessing Officer asked the assessee to justify genuineness of the said purchases, but the assessee filed only documents available with her i.e. copy of purchase bills, copy of ledger account of those parties in t of account. No other documents including confirmation from those parties were filed by the assessee before the Assessing Officer on the other hand his possession brought to the notice of the as issued were not genuine. He referred to various observation during the course of the search at the including admission by Sh Gautam Jain that approximately 70 dummy concerns accommodation entry for purchase namely Rajan Gems and Shri Ganesh Gems are concerns of shri Gautam Jain of those concerns also any actual business activity. From the ledger account of Rajan Gems in the books of accounts of the assessee, available on page 16 of the paperbook, it is seen that payment of has been shown to have been made on 24/05/2014. course, no unknown party will We have heard rival submission of the parties on the issue in dispute and perused the relevant material on record. has shown to have made purchase of emerald i.e. precious stones, from M/s Rajan Gems and diamonds of from M/s Shri Ganesh Gems. The Assessing Officer asked the assessee to justify genuineness of the said purchases, but the assessee filed only documents available with her i.e. copy of purchase bills, copy of ledger account of those parties in t of account. No other documents including confirmation from those parties were filed by the assessee before the lower authorities. The Assessing Officer on the other hand, in view of the information in possession brought to the notice of the assessee that those bills issued were not genuine. He referred to various observation during the course of the search at the premises of Sh Gautam Jain including admission by Sh Gautam Jain that approximately 70 dummy concerns were operated by him for accommodation entry for purchases to various parties. The namely Rajan Gems and Shri Ganesh Gems are part of those 70 of shri Gautam Jain. The directors/ partners/proprietors of those concerns also admited to be for namesake with any actual business activity. From the ledger account of Rajan Gems in the books of accounts of the assessee, available on page 16 of the paperbook, it is seen that payment of ₹12 lakh has been shown to have been made on 24/05/2014. course, no unknown party will keep the payments pending and it is 1310/M/2023 16 Falguni Samir Mehta We have heard rival submission of the parties on the issue in dispute and perused the relevant material on record. The assessee i.e. precious stones, Rajan Gems and diamonds of from M/s Shri Ganesh Gems. The Assessing Officer asked the assessee to justify genuineness of the said purchases, but the assessee filed only documents available with her i.e. copy of purchase bills, copy of ledger account of those parties in the books of account. No other documents including confirmation from those authorities. The in view of the information in sessee that those bills issued were not genuine. He referred to various observations made of Sh Gautam Jain including admission by Sh Gautam Jain that approximately 70 operated by him for providing to various parties. The parties part of those 70 The directors/ partners/proprietors to be for namesake without doing any actual business activity. From the ledger account of Rajan Gems in the books of accounts of the assessee, available on page 16 12 lakh to said party has been shown to have been made on 24/05/2014. In normal pending and it is possible only if buyer and seller are known to each other. But in the case, assessee has not produced any evidence that said party was known to the assessee. The assessee confirmation from the said party verification before the Assessing Officer. The facts in respect of another party are also similar. Further, in the copy of bill issued by Rajan Gems available on paperbook page been shown to have been sold in the unit of grams, whereas precious stones are sold in the unit of Carats. filed a copy of the valuation report as on 31/03/2012 and the said valuation report the unit of the green e Carat. In our opinion, a real businessmen dealing in emerald will never such mistake of Thus, there are obvious discrepancies or contradictions in the documents produced by the asses the assessee to produce both parties for verification before the Assessing Officer. In the circumstances, the purchases shown to have been made through th be said to be genuine purch by registered valuer (PB stated in bills issued by Rajan Gems and Ganesh Gems is appearing , thus, it is believed that he must have personally verified existence of jewellary containing those diamond and emerald logical inference is that the assessee had possible only if buyer and seller are known to each other. But in the case, assessee has not produced any evidence that said party was known to the assessee. The assessee has neither furnished any confirmation from the said party nor produced verification before the Assessing Officer. The facts in respect of another party are also similar. Further, in the copy of bill issued by Rajan Gems available on paperbook page 15, ‘green e been shown to have been sold in the unit of grams, whereas precious stones are sold in the unit of Carats. The assessee has filed a copy of the valuation report as on 31/03/2012 and the said n report the unit of the green emerald has been reported in Carat. In our opinion, a real businessmen dealing in emerald will such mistake of recording unit of said precious stone as gms. there are obvious discrepancies or contradictions in the documents produced by the assessee and therefore it was onus of the assessee to produce both parties for verification before the Assessing Officer. In the circumstances, the purchases shown to have been made through the bills issued by those to parties be said to be genuine purchases. In the valuation certificate issued (PB-35) , the quantity of diamond and emerald stated in bills issued by Rajan Gems and Ganesh Gems is appearing , thus, it is believed that he must have personally verified ary containing those diamond and emerald logical inference is that the assessee had purchased those goods 1310/M/2023 17 Falguni Samir Mehta possible only if buyer and seller are known to each other. But in the case, assessee has not produced any evidence that said party was her furnished any that party for verification before the Assessing Officer. The facts in respect of another party are also similar. Further, in the copy of bill issued by een emerald’ has been shown to have been sold in the unit of grams, whereas The assessee has filed a copy of the valuation report as on 31/03/2012 and the said erald has been reported in Carat. In our opinion, a real businessmen dealing in emerald will unit of said precious stone as gms. there are obvious discrepancies or contradictions in the see and therefore it was onus of the assessee to produce both parties for verification before the Assessing Officer. In the circumstances, the purchases shown to e bills issued by those to parties cannot . In the valuation certificate issued 35) , the quantity of diamond and emerald stated in bills issued by Rajan Gems and Ganesh Gems is appearing , thus, it is believed that he must have personally verified ary containing those diamond and emerald , then purchased those goods from grey market in cash and source of which has not been explained by the assessee. 8.8.1 The learned counsel of the assessee submitted purchases have been entered in the books of accounts of the assessee as investment and therefore no addition could have been made under section 69C of the A assessee referred to paperbook page 13 the assessee as on 31/03/2 of jewelry amounting to has provided detailed ledger account of on paperbook page 27 ready reference: grey market in cash and source of which has not been explained by the assessee. The learned counsel of the assessee submitted purchases have been entered in the books of accounts of the assessee as investment and therefore no addition could have been made under section 69C of the Act. The learned counsel of the to paperbook page 13, which is balance sh the assessee as on 31/03/2012. In the said balance sheet of jewelry amounting to ₹46,35,145.33 is appearing . The assessee iled ledger account of jewellary, which is available on paperbook page 27. The said ledger account is 1310/M/2023 18 Falguni Samir Mehta grey market in cash and source of which has not been The learned counsel of the assessee submitted that said purchases have been entered in the books of accounts of the assessee as investment and therefore no addition could have been The learned counsel of the , which is balance sheet of . In the said balance sheet, amount .33 is appearing . The assessee , which is available reproduced for 8.8.2 In our opinion, the assessee can make entry of the purchases either as stock in trade way of making entry of investment and personal asset, the assessee cannot escape from explaini is obvious contradiction in the documents filed by the assessee. On one hand, the assessee is claimed jewelry available with her as on 31/03/2012 amounting to called purchases made of in the wealth tax return the assessee has shown jewelry as on 31/03/2012 amounting to shown to have made from those two pa all the way, it is onus on the assessee to explain the source of the investment of Rs.17,65,500/ balance sheet. We have already held that in view of physical verification of goods by the those items, a logical inference is that the assessee had purchased those goods from grey market in cash and source of which has not been explained by the assessee. purchase in cash, the Assessing Officer is justified in making addition under section 69C the A 8.8.3 In the case of Hon’ble High Court held that section 6 expenditure and not to the expenditure itself. But case, the assessee has recorded those purchases as investment , In our opinion, the assessee can make entry of the purchases either as stock in trade of trading or investment. Thus by way of making entry of investment and personal asset, the assessee cannot escape from explaining source of investment. is obvious contradiction in the documents filed by the assessee. On one hand, the assessee is claimed jewelry available with her as on 31/03/2012 amounting to ₹46,35,145/- which includes the so called purchases made of ₹ 19, 53, 400/-and ₹17,67,500/ in the wealth tax return the assessee has shown jewelry as on 31/03/2012 amounting to ₹55, 90, 292/-. When the purchases shown to have made from those two parties are not genuine, then all the way, it is onus on the assessee to explain the source of the 17,65,500/- and Rs.19,53,400/- appearing in her We have already held that in view of physical verification of goods by the registered valuer vis-a vis bogus bills of , a logical inference is that the assessee had purchased those goods from grey market in cash and source of which has not been explained by the assessee. In absence of explaining source of , the Assessing Officer is justified in making addition under section 69C the Act. In the case of CIT Vs Radhika Creation (supra), High Court held that section 69C refers to source of expenditure and not to the expenditure itself. But case, the assessee has recorded those purchases as investment , 1310/M/2023 19 Falguni Samir Mehta In our opinion, the assessee can make entry of the investment. Thus by way of making entry of investment and personal asset, the assessee ng source of investment. Further there is obvious contradiction in the documents filed by the assessee. On one hand, the assessee is claimed jewelry available with her as on which includes the so 17,67,500/- whereas in the wealth tax return the assessee has shown jewelry as on When the purchases rties are not genuine, then all the way, it is onus on the assessee to explain the source of the appearing in her We have already held that in view of physical a vis bogus bills of , a logical inference is that the assessee had purchased those goods from grey market in cash and source of which has not In absence of explaining source of , the Assessing Officer is justified in making CIT Vs Radhika Creation (supra), the 9C refers to source of expenditure and not to the expenditure itself. But in the instant case, the assessee has recorded those purchases as investment , but the bills issued by the seller parties are not found to be genuine and therefore it is infered by the assessee and cash . Thus, facts of the instant case are case of PCIT Vs Vaman International Private Limited (supra), assessee substantiated purchases by way of confirmation and other evidences but in the case assessee has not filed any such documents to support the genuineness of the purchases, and thus the facts of the instant case are distinguishable. 8.8.4 In view of about discussion, we uphold the order of the Ld. CIT(A) on the issue in dispute. The ground Nos. one and two of the appeal of the assessee 9. In the result, the appeal of the assessee is dismissed. Order pronounced in th Sd/- (KAVITHA RAJAGOPAL) JUDICIAL MEMBER Mumbai; Dated: 23/08/2023 Rahul Sharma, Sr. P.S. Copy of the Order forwarded to 1. The Appellant 2. The Respondent. 3. CIT 4. DR, ITAT, Mumbai 5. Guard file. //True Copy// but the bills issued by the seller parties are not found to be genuine infered that those purchases were made in cash the assessee has not explained source of the facts of the instant case are distinguishable. In the PCIT Vs Vaman International Private Limited (supra), assessee substantiated purchases by way of confirmation and other evidences but in the case assessee has not filed any such documents to support the genuineness of the purchases, and thus the facts of the instant case are distinguishable. iew of about discussion, we uphold the order of the Ld. CIT(A) on the issue in dispute. The ground Nos. one and two of the appeal of the assessee are accordingly dismissed. In the result, the appeal of the assessee is dismissed. Order pronounced in the open Court on 23/08/2023. - Sd/ (KAVITHA RAJAGOPAL) (OM PRAKASH KANT) JUDICIAL MEMBER ACCOUNTANT MEMBER Copy of the Order forwarded to : BY ORDER, (Assistant Registrar) ITAT, Mumbai 1310/M/2023 20 Falguni Samir Mehta but the bills issued by the seller parties are not found to be genuine that those purchases were made in cash t explained source of the distinguishable. In the PCIT Vs Vaman International Private Limited (supra), the assessee substantiated purchases by way of confirmation and other evidences but in the case assessee has not filed any such documents to support the genuineness of the purchases, and thus iew of about discussion, we uphold the order of the Ld. CIT(A) on the issue in dispute. The ground Nos. one and two of accordingly dismissed. In the result, the appeal of the assessee is dismissed. Sd/- (OM PRAKASH KANT) ACCOUNTANT MEMBER BY ORDER, (Assistant Registrar) ITAT, Mumbai