PURNA PURSHOTTAM EXPORTS , MUMBAI V. INCOME TAX OFFICER 32(2)(5), MUMBAI

ITA 1616/MUM/2023

AI Insights

The case involves Purna Pushottam Exports, which faced reassessment under sections 147 and 148 of the Income Tax Act for the assessment years 2007-08 and 2018-19. The reassessment was based on information from the Investigation Wing regarding alleged accommodation entries of bogus purchases. The Tribunal examined the validity of the notices issued and the subsequent additions made under section 69C for treating genuine purchases as bogus. The Tribunal found that the additions made were excessive and not fully justified, leading to the partial allowance of the appeal for 2007-08 and the full allowance for 2018-19, with specific directions on how the additions should be recalculated.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 123266 (ITAT-MUMBAI)
• Duration Of Justice: 3 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-08-2023
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: C
• Next Hearing Date: 22-08-2023
• Assessment Year: 2007-2008
• Appeal Filed On: 09-05-2023
• Other Referred Cases: N.K. Proteins Ltd. v. DCIT, PCIT vs. Paramshakhti Distributors Pvt. Ltd., M/s Kachwala Gems V/s JCIT, CIT vs. Durga Prasad More, Khujji @ Surendra Tiwari vs. The State of Madhya Pradesh, Shainrup Sampatram v. CIT, Stone Age (P.) Ltd. v. DCIT
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Bogus purchase; Unexplained expenditure; Business income; Loose papers; Principle of natural justice; Accommodation entries; Reason to believe; Borrowed satisfaction; Set aside
• Section: 147; 148; 69C; 143(3); 133A; 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “C” MUMBAI BEFORE SHRI OM PRAKASH KANT (ACCOUNTANT MEMBER) AND SHRI SANDEEP SINGH KARHAIL (JUDICIAL MEMBER) ITA No. 1616/MUM/2023 Assessment Year: 2007-08 Purna Pushottam Exports, Gala NO. 329, Vardhman Industrial Estate, Behind Petrol Pump, S.V. Road, Dahisar East, Mumbai-400068. Vs. ITO-32(3)(5), Mumbai. PAN No. AAEFP 8085 E Appellant Respondent ITA No. 1618/MUM/2023 Assessment Year: 2018-19 Purna Pushottam Exports, Gala NO. 329, Vardhman Industrial Estate, Behind Petrol Pump, S.V. Road, Dahisar East, Mumbai-400068. Vs. ACIT Central Circle, 2(2), Mumbai. PAN No. AAEFP 8085 E Appellant Respondent Assessee by : Mr. K. Gopal, Adv. & Mr. Om Kandalkar Revenue by : Mr. H.M. Bhatt, DR Date of Hearing : 23/08/2023 Date of pronouncement : 28/08/2023 ORDER PER OM PRAKASH KANT, AM These appeals by the assessee are directed against two separate orders, both dated 05.04.2023, passed by the Ld. Commissioner of Income Ld. CIT(A)’] for assessment years 2008 appeal being connected with the same assessee together and disposed of by way of this consolidated order for convenience and avoid repetition of facts. 2. Firstly, we take up the appeal of the assessee for assessment year 2008-09. The relevant grounds raised by the assessee are reproduced as under: 1. The Ld. CIT(A) erred in upholding the validity of notice issued under s referred to as "the Act) without appreciating the fact that no valid reasons were recorded before the issuing the said notice. The notice issued under section 148 dated 27.03.2014 lacks jurisdiction and the bad-in law and void that there was no failure on the part of Appellant to disclose material particulars and facts in the return of income, thus reopening after period 2. 2. The Ld. CIT(A) failed to appreciate that the A.O. has recorded the reasons on the The reasons recorded on the basis of a report sent by the investigation wing without making any further enquiry on his own by the AO amounts to a borrowed satisfaction. Thus, the satisfaction that he has a escaped assessment as recorded in the reasons recorded is a borrowed satisfaction and not of his own satisfaction. Thus, the reasons recor notice under section 148 of the Act. Thus, the notice issued under section 148 dated 27.03.2014 and the assessment order dated 23.03.2015 are bad 3. 3. The Ld. CIT(A) erred in confirming t 1,57,77,971/ treating genuine purchases as bogus purchases on the basis of conjecture and surmises. Thus, the addition of Rs. 1,57,77,971/ 4. 4. The Ld. CIT(A) has fail section 69C are not applicable as source of expenditure incurred is explained by Appellant along with supporting documents. 5. 5. The Ld. CIT( on the statements of the third party without providing any Commissioner of Income-tax (Appeals) – 48, Mumbai [in short ‘the Ld. CIT(A)’] for assessment years 2008-09 and 2018 appeal being connected with the same assessee together and disposed of by way of this consolidated order for ence and avoid repetition of facts. Firstly, we take up the appeal of the assessee for assessment 09. The relevant grounds raised by the assessee are reproduced as under: The Ld. CIT(A) erred in upholding the validity of notice issued under section 148 of Income tax Act, 1961 (herein after referred to as "the Act) without appreciating the fact that no valid reasons were recorded before the issuing the said notice. The notice issued under section 148 dated 27.03.2014 lacks jurisdiction and the assessment order dated 23.03.2015 is in law and void-ab-initio. The CIT(A) failed to appreciate that there was no failure on the part of Appellant to disclose material particulars and facts in the return of income, thus reopening after period 4 years by AO is invalid. 2. The Ld. CIT(A) failed to appreciate that the A.O. has recorded the reasons on the basis ol borrowed satisfaction. The reasons recorded on the basis of a report sent by the investigation wing without making any further enquiry on his by the AO amounts to a borrowed satisfaction. Thus, the satisfaction that he has a reason to believe that income has escaped assessment as recorded in the reasons recorded is a borrowed satisfaction and not of his own satisfaction. Thus, the reasons recorded are not valid reasons recorded to issue notice under section 148 of the Act. Thus, the notice issued under section 148 dated 27.03.2014 and the assessment order dated 23.03.2015 are bad-in-law and void-ab- 3. The Ld. CIT(A) erred in confirming the addition of Rs. 1,57,77,971/- made by the A.O. under section 69C of the Act treating genuine purchases as bogus purchases on the basis of conjecture and surmises. Thus, the addition of Rs. 1,57,77,971/-is not at all justified. 4. The Ld. CIT(A) has failed to appreciate that provisions of section 69C are not applicable as source of expenditure incurred is explained by Appellant along with supporting documents. 5. The Ld. CIT(A) failed to appreciate that the A.O. has relied on the statements of the third party without providing any 1616 & 1618/M/2023 2 Purna Pushottam Exports 48, Mumbai [in short ‘the 09 and 2018-19. As both appeal being connected with the same assessee, were heard together and disposed of by way of this consolidated order for Firstly, we take up the appeal of the assessee for assessment 09. The relevant grounds raised by the assessee are The Ld. CIT(A) erred in upholding the validity of notice issued ection 148 of Income tax Act, 1961 (herein after referred to as "the Act) without appreciating the fact that no valid reasons were recorded before the issuing the said notice. The notice issued under section 148 dated 27.03.2014 lacks assessment order dated 23.03.2015 is initio. The CIT(A) failed to appreciate that there was no failure on the part of Appellant to disclose material particulars and facts in the return of income, thus 2. The Ld. CIT(A) failed to appreciate that the A.O. has basis ol borrowed satisfaction. The reasons recorded on the basis of a report sent by the investigation wing without making any further enquiry on his by the AO amounts to a borrowed satisfaction. Thus, the reason to believe that income has escaped assessment as recorded in the reasons recorded is a borrowed satisfaction and not of his own satisfaction. Thus, ded are not valid reasons recorded to issue notice under section 148 of the Act. Thus, the notice issued under section 148 dated 27.03.2014 and the assessment -initio. he addition of Rs. A.O. under section 69C of the Act treating genuine purchases as bogus purchases on the basis of conjecture and surmises. Thus, the addition of Rs. ed to appreciate that provisions of section 69C are not applicable as source of expenditure necessary A) failed to appreciate that the A.O. has relied on the statements of the third party without providing any opportunity to the Appellant to cross Thus, the addition of Rs. 1,57,77,971/ statement of a third part is not justified as the same is in breach of principles of natural justice and the same may be deleted. 6. 6. Without prejudice to the above the Ld. CIT(A) failed to appreciate that the A.O. has erred in treating the genui purchases as bogus when the sales of the same have not been doubted. Thus, the addition of Rs. 1,57,77,971/ bogus purchases is not at all justified and the same may be deleted. 3. Briefly stated, facts of the case are that the assessee filed return of income for the year under consideration on 27.10.2007 declaring Nil income. The return of income was processed u/s 143(1) of the Income Subsequently, in view of the information received from the Investigation Wing that the assessee obtained accommodation entries of purchase from the concerns controlled by Shri Rajendra Jain and his group, which he admitted during the course of the search carried out by the investigation wing on 03.10.2013 at his premises, the assessment was reopened u/s 147 of the Act a recording reasons to believe the reasons recorded the Assessing Officer noted that assessee obtained accommodation entry of bogus purchase amounting to Rs.157,77,971/- through M/s ‘Sun Diam’ which were Group. In the reassessment order dated 23.03.2015 passed u/s 147 of the Act, the Assessing Officer disallowed the entire purchases of Rs.1,57, expenditure u/s 69C of the Act. On further appeal, the Ld. CIT(A) opportunity to the Appellant to cross-examine the said person. Thus, the addition of Rs. 1,57,77,971/- made relying on the statement of a third party without granting cross examination is not justified as the same is in breach of principles of natural justice and the same may be deleted. 6. Without prejudice to the above the Ld. CIT(A) failed to appreciate that the A.O. has erred in treating the genui purchases as bogus when the sales of the same have not been doubted. Thus, the addition of Rs. 1,57,77,971/- bogus purchases is not at all justified and the same may be deleted. Briefly stated, facts of the case are that the assessee filed return of income for the year under consideration on 27.10.2007 declaring Nil income. The return of income was processed u/s 143(1) of the Income-tax Act, 1961 (in short ‘the Act’). in view of the information received from the ion Wing that the assessee obtained accommodation entries of purchase from the concerns controlled by Shri Rajendra Jain and his group, which he admitted during the course of the search carried out by the investigation wing on 03.10.2013 at his assessment was reopened u/s 147 of the Act a recording reasons to believe that income escaped assessment the reasons recorded the Assessing Officer noted that assessee obtained accommodation entry of bogus purchase amounting to hrough M/s ‘Moulimani Impex Pvt. Ltd which were part of group concerns of Shri Rajendra Jain Group. In the reassessment order dated 23.03.2015 passed u/s , the Assessing Officer disallowed the entire 57,77,971/- holding the same to be unexplained expenditure u/s 69C of the Act. On further appeal, the Ld. CIT(A) 1616 & 1618/M/2023 3 Purna Pushottam Exports examine the said person. made relying on the y without granting cross examination is not justified as the same is in breach of principles of natural 6. Without prejudice to the above the Ld. CIT(A) failed to appreciate that the A.O. has erred in treating the genuine purchases as bogus when the sales of the same have not been as alleged bogus purchases is not at all justified and the same may be Briefly stated, facts of the case are that the assessee filed its return of income for the year under consideration on 27.10.2007 declaring Nil income. The return of income was processed u/s tax Act, 1961 (in short ‘the Act’). in view of the information received from the ion Wing that the assessee obtained accommodation entries of purchase from the concerns controlled by Shri Rajendra Jain and his group, which he admitted during the course of the search carried out by the investigation wing on 03.10.2013 at his assessment was reopened u/s 147 of the Act after that income escaped assessment. In the reasons recorded the Assessing Officer noted that assessee obtained accommodation entry of bogus purchase amounting to Moulimani Impex Pvt. Ltd’. and M/s group concerns of Shri Rajendra Jain Group. In the reassessment order dated 23.03.2015 passed u/s , the Assessing Officer disallowed the entire holding the same to be unexplained expenditure u/s 69C of the Act. On further appeal, the Ld. CIT(A) upheld the addition relying on the decision of the Hon’ble Supreme Court in the case of 354 (SC). Aggrieved the assessee is in appeal before the Tribunal raising the grounds as reproduced above. 3. Before us, the assessee has filed a Paper Book containing pages 1 to 110. 4. Regarding the ground No validity of the reasses submitted that assessee wa grounds and accordingly same are dismissed as not pressed by the assessee. 5. The ground No Rs.1,57,77,971/- made by the Assessing Officer as unexplained expenditure u/s 69C of the Act. It was submitted by the assessee before the Ld. CIT(A) that assessee was in the business of cut and polished diamond for last many years. It purchased rough diamond and processed it into cut and polished diamond in relevant previous year. The assessee’s which was wholly export turnover. It was submitted that the assessee made purchase which consist of Rs.1,40,45,449/ Rs.17,32,522/- from M/s Moulimani Export Pvt. Ltd. The assessee submitted that cut and polished diamonds purchased are directly upheld the addition relying on the decision of the Hon’ble Supreme Court in the case of N.K. Proteins Ltd. v. DCIT (2017) 292 CTR ved the assessee is in appeal before the Tribunal raising the grounds as reproduced above. Before us, the assessee has filed a Paper Book containing Regarding the ground Nos. 1 and 2 of the appeal challenging validity of the reassessment, the Ld. Counsel of the assessee submitted that assessee was not interested in pursuing tho grounds and accordingly same are dismissed as not pressed by the The ground Nos. 3 to 6 of the appeal relates to ade by the Assessing Officer as unexplained expenditure u/s 69C of the Act. It was submitted by the assessee before the Ld. CIT(A) that assessee was in the business of cut and polished diamond for last many years. It purchased rough diamond t into cut and polished diamond in relevant previous total sales turnover was of Rs.1,66,42,088/ which was wholly export turnover. It was submitted that the made purchase of Rs.1,57,77,971/- from two parties f Rs.1,40,45,449/- from M/s Sun Diam and from M/s Moulimani Export Pvt. Ltd. The assessee submitted that cut and polished diamonds purchased are directly 1616 & 1618/M/2023 4 Purna Pushottam Exports upheld the addition relying on the decision of the Hon’ble Supreme N.K. Proteins Ltd. v. DCIT (2017) 292 CTR ved the assessee is in appeal before the Tribunal Before us, the assessee has filed a Paper Book containing . 1 and 2 of the appeal challenging sment, the Ld. Counsel of the assessee s not interested in pursuing those grounds and accordingly same are dismissed as not pressed by the . 3 to 6 of the appeal relates to addition of ade by the Assessing Officer as unexplained expenditure u/s 69C of the Act. It was submitted by the assessee before the Ld. CIT(A) that assessee was in the business of cut and polished diamond for last many years. It purchased rough diamond t into cut and polished diamond in relevant previous total sales turnover was of Rs.1,66,42,088/- which was wholly export turnover. It was submitted that the from two parties , from M/s Sun Diam and from M/s Moulimani Export Pvt. Ltd. The assessee submitted that cut and polished diamonds purchased are directly exported and thus purchase and sales are having direct nexus. Whereas rough diamonds pu manufacture/process cut and polished diamonds Ld. CIT(A), the assessee provided one to one co purchase and sales of cut and polished di processed cut and polished diamonds. The assessee further submitted that if the purchase bills from the said parties was held to be bogus, then no 100% disallowance of the purchase could be made of the assessee as the sales have not been export sales and thus purchases are not denied at maximum a certain percentage of presumption that assessee must have purchases those goods from grey market. In support of contention, the various decisions including of 2016, Bombay High Court. disallowance observing as under: “8. Decision on Ground No. 2: The appellant in his submission during this ap stated that the AO had merely proceeded in the assessment order even after details/documents were furnished by him during the assessment proceedings and apart from the statement given by Shri Rajendra Jain during the course of search evidence/documents were available with the AO to prove that the appellant was one of the beneficiaries of the accommodation entry. I have carefully perused the facts of the case, submission of the appellant and the order of the Assessing Officer. submission of the appellant that the appellant has not denied his transactions with M/s Moulimani Impex Pvt Ltd and M/s. Sun Diam, exported and thus purchase and sales are having direct nexus. Whereas rough diamonds purchased were sent to manufacture/process into cut and polished diamonds and resultant cut and polished diamonds were then further exported. Before the Ld. CIT(A), the assessee provided one to one co- purchase and sales of cut and polished diamonds as well as processed cut and polished diamonds. The assessee further submitted that if the purchase bills from the said parties was held no 100% disallowance of the purchase could be made of the assessee as the sales have not been export sales and thus purchases are not denied. He a certain percentage of profit could be added on the presumption that assessee must have purchases those goods from grey market. In support of contention, the assessee relied on various decisions including Pr. CIT v. Haji Adam in ITA No. 1004 of 2016, Bombay High Court. However, the Ld. CIT(A) upheld the disallowance observing as under: “8. Decision on Ground No. 2: The appellant in his submission during this appellate proceeding has stated that the AO had merely proceeded in the assessment order even after details/documents were furnished by him during the assessment proceedings and apart from the statement given by Shri Rajendra Jain during the course of search no other evidence/documents were available with the AO to prove that the appellant was one of the beneficiaries of the accommodation entry. I have carefully perused the facts of the case, submission of the appellant and the order of the Assessing Officer. It is seen from the submission of the appellant that the appellant has not denied his transactions with M/s Moulimani Impex Pvt Ltd and M/s. Sun Diam, 1616 & 1618/M/2023 5 Purna Pushottam Exports exported and thus purchase and sales are having direct nexus. were sent to o cut and polished diamonds and resultant then further exported. Before the -relation of the amonds as well as processed cut and polished diamonds. The assessee further submitted that if the purchase bills from the said parties was held no 100% disallowance of the purchase could be made of the assessee as the sales have not been disputed being He submitted that profit could be added on the presumption that assessee must have purchases those goods from assessee relied on Pr. CIT v. Haji Adam in ITA No. 1004 However, the Ld. CIT(A) upheld the pellate proceeding has stated that the AO had merely proceeded in the assessment order even after details/documents were furnished by him during the assessment proceedings and apart from the statement given by Shri no other evidence/documents were available with the AO to prove that the appellant was one of the beneficiaries of the accommodation entry. I have carefully perused the facts of the case, submission of the It is seen from the submission of the appellant that the appellant has not denied his transactions with M/s Moulimani Impex Pvt Ltd and M/s. Sun Diam, It was observed during the course of the search on Shri Rajendra Jain group that M/s Moulimani Impex Pvt were the entities controlled and operated by Shri Rajendra Jain group. Further, it was also found during the search that no stock was maintained/found. Shri Rajendra Jain had admitted on oath that no actual business was conducted th entities/companies controlled and operated from his premises and the entities which were found in his premises were only paper companies. It was during the course of the search that Shri Rajendra Jain in his statement admitted that M/s Moulimani Diam, with whom the appellant had traded were such companies which were controlled and operated by him. Further, it is seen from the facts of the case that the Assessing Officer and the DDIT had not reached the conclusion that the of the appellant company was providing of accommodation entries, only on the basis of the statement given by Shri Rajendra Jain but it was also on the fact that Shri Rajendra Jain had failed to prove the genuineness of his business before the DDIT materials/details submitted by the appellant during the course of the assessment proceeding were not sufficient to prove the creditworthiness of M/s Moulimani Impex Pt Ltd and M/S. Sun Diam, or the genuineness of the transaction. Once, it was prov and M/s. Sun Diam, were paper companies controlled and operated by Shri Rajendra Jain who was in the business of providing accommodation entries then the ledger and the confirmation received from such credit Apart from the above, the appellant has raised the argument during the assessment proceeding that the payments were made through banking channel. However, in my -considered view this does not suo moto estab the transaction or creditworthiness of the purchase parties. In this regard, it would be proper to bring out relevant legal position on these issues pertaining to the case of the appellant that merely because the funds have moved th entities concerned have arranged the paperwork, the transaction cannot be held as genuine. The matter needs to be viewed in its entirety that too after taking into account various facts enlisted above. Reference in this regard Delhi Bench in the case of DCIT Vs. Smt. Phoolwati Devi (2009) 314 ITAT (Delhi), wherein it is held as under: It was observed during the course of the search on Shri Rajendra Jain group that M/s Moulimani Impex Pvt Ltd and M/s. Sun Diam, were the entities controlled and operated by Shri Rajendra Jain group. Further, it was also found during the search that no stock was maintained/found. Shri Rajendra Jain had admitted on oath that no actual business was conducted through the entities/companies controlled and operated from his premises and the entities which were found in his premises were only paper It was during the course of the search that Shri Rajendra Jain in his statement admitted that M/s Moulimani Impex Pt Ltd and M/s. Sun Diam, with whom the appellant had traded were such companies which were controlled and operated by him. Further, it is seen from the facts of the case that the Assessing Officer and the DDIT had not reached the conclusion that the of the appellant company was providing of accommodation entries, only on the basis of the statement given by Shri Rajendra Jain but it was also on the fact that Shri Rajendra Jain had failed to prove the genuineness of his business before the DDIT and the materials/details submitted by the appellant during the course of the assessment proceeding were not sufficient to prove the creditworthiness of M/s Moulimani Impex Pt Ltd and M/S. Sun Diam, or the genuineness of the transaction. Once, it was proved beyond doubt that M/s Moulimani Impex Pvt Ltd and M/s. Sun Diam, were paper companies controlled and operated by Shri Rajendra Jain who was in the business of providing accommodation entries then the ledger and the confirmation received from such credit less persons do not carry any evidentiary value. Apart from the above, the appellant has raised the argument during the assessment proceeding that the payments were made through banking channel. However, in my considered view this does not suo moto establish the genuineness of the transaction or creditworthiness of the purchase parties. In this regard, it would be proper to bring out relevant legal position on these issues pertaining to the case of the appellant that merely because the funds have moved through banking channel and the entities concerned have arranged the paperwork, the transaction cannot be held as genuine. The matter needs to be viewed in its entirety that too after taking into account various facts enlisted Reference in this regard is invited to the decision of the Hon'ble ITAT Delhi Bench in the case of DCIT Vs. Smt. Phoolwati Devi (2009) 314 ITAT (Delhi), wherein it is held as under:- 1616 & 1618/M/2023 6 Purna Pushottam Exports It was observed during the course of the search on Shri Rajendra Ltd and M/s. Sun Diam, were the entities controlled and operated by Shri Rajendra Jain group. Further, it was also found during the search that no stock was maintained/found. Shri Rajendra Jain had admitted on oath rough the entities/companies controlled and operated from his premises and the entities which were found in his premises were only paper It was during the course of the search that Shri Rajendra Jain in his Impex Pt Ltd and M/s. Sun Diam, with whom the appellant had traded were such companies Further, it is seen from the facts of the case that the Assessing Officer and the DDIT had not reached the conclusion that the affairs of the appellant company was providing of accommodation entries, only on the basis of the statement given by Shri Rajendra Jain but it was also on the fact that Shri Rajendra Jain had failed to prove the and the materials/details submitted by the appellant during the course of the assessment proceeding were not sufficient to prove the creditworthiness of M/s Moulimani Impex Pt Ltd and M/S. Sun Diam, ed beyond doubt that M/s Moulimani Impex Pvt Ltd and M/s. Sun Diam, were paper companies controlled and operated by Shri Rajendra Jain who was in the business of providing accommodation entries then the ledger and the confirmation received less persons do not carry any evidentiary value. Apart from the above, the appellant has raised the argument during the assessment proceeding that the payments were made through lish the genuineness of In this regard, it would be proper to bring out relevant legal position on these issues pertaining to the case of the appellant that merely rough banking channel and the entities concerned have arranged the paperwork, the transaction cannot be held as genuine. The matter needs to be viewed in its entirety that too after taking into account various facts enlisted is invited to the decision of the Hon'ble ITAT Delhi Bench in the case of DCIT Vs. Smt. Phoolwati Devi (2009) 314 "Despite the documentation supporting the claim of the assessee superficially, the evidence could view of the surrounding circumstances and human probabilities that there were certain features of the case which believe the documentary evidence. Further, it was settled in the case of CIT vs. Durga Prasad More 82 IT 540 (SC) that wher document, it is for that party to establish the truth of these recitals. It was further held by the Apex Court in this case that the tax authorities are entitled to look into the surrounding circumstances to find out the reality of such recitals. In the case of M/s Kachwala Gems V/ JCIT ITA No 134/JP/2002 dated 10/12/2003, which has been affirmed by the Supreme Court in the case of M/.Kachwala Gems V/s JCIT (2006) 20 6CTR(SC)585,288 IT 10(SC), it was held that payment by account payee cheque is not sufficient to establish the genuineness of purchases. Further, in the case of CIT Vs Prashant (P)(1994) 121 CTR (Cal) 20, the Calcutta High Court has held that even payment by ac payee cheque is not sacrosanct and it would not make an otherwise non-genuine transaction genuine. Further, the contention of the appellant that they were not provided with the opportunity to cross examination of the third party whose statement was r As stated above the DDIT and the AO had reached to the conclusion that the transactions entered by the appellant with M/s Moulimani Impex Pt Ltd and M/s. Rajendra Jain were bogus, not only on the statement of Shri Rajendra Jain and the persons whose statements were recorded by the DDIT, but it was also on the basis/findings during the search/post search and the assessment proceedings by the A wherein he came to the appellant M/s Moulimani Impex Pvt Ltd and M/s. Sun Diam, were controlled and operated by Shri Rajendra Jain were bogus. The appellant has failed to furnish/explain/prove the creditworthiness of the M/s Moulimani Impex Pvt Ltd and M/s. Sun Diam, with whom he had transacted. This further, proves that the finding of the search/post search proceedings and the observation of the Assessing Officer during the assessment proceedings had direct connection with the given by Shri Rajendra Jain that no real business was conducted in any of the firms/companies /entities which were operated from his premises "Despite the documentation supporting the claim of the assessee superficially, the evidence could not be accepted in view of the surrounding circumstances and human probabilities that there were certain features of the case which believe the documentary evidence. Further, it was settled in the case of CIT vs. Durga Prasad More 82 IT 540 (SC) that where a party relies on self-serving recitals in a document, it is for that party to establish the truth of these recitals. It was further held by the Apex Court in this case that the tax authorities are entitled to look into the surrounding circumstances to ind out the reality of such recitals. In the case of M/s Kachwala Gems V/ JCIT ITA No 134/JP/2002 dated 10/12/2003, which has been affirmed by the Supreme Court in the case of M/.Kachwala Gems V/s JCIT (2006) 20 SC)585,288 IT 10(SC), it was held that payment by account payee cheque is not sufficient to establish the genuineness of Further, in the case of CIT Vs Prashant (P)(1994) 121 CTR (Cal) 20, the Calcutta High Court has held that even payment by ac payee cheque is not sacrosanct and it would not make an otherwise genuine transaction genuine. Further, the contention of the appellant that they were not provided with the opportunity to cross examination of the third party whose statement was relied by the Assessing Officer is also not acceptable. As stated above the DDIT and the AO had reached to the conclusion that the transactions entered by the appellant with M/s Moulimani Impex Pt Ltd and M/s. Sun Diam, controlled and operated by Shri dra Jain were bogus, not only on the statement of Shri Rajendra Jain and the persons whose statements were recorded by the DDIT, but it was also on the basis/findings during the search/post search and the assessment proceedings by the A wherein he came to the conclusion that the transactions entered by the appellant M/s Moulimani Impex Pvt Ltd and M/s. Sun Diam, were controlled and operated by Shri Rajendra Jain were bogus. The appellant has failed to furnish/explain/prove the creditworthiness of ulimani Impex Pvt Ltd and M/s. Sun Diam, with whom he had transacted. This further, proves that the finding of the search/post search proceedings and the observation of the Assessing Officer during the assessment proceedings had direct connection with the statement given by Shri Rajendra Jain that no real business was conducted in any of the firms/companies /entities which were operated from his 1616 & 1618/M/2023 7 Purna Pushottam Exports "Despite the documentation supporting the claim of the not be accepted in view of the surrounding circumstances and human probabilities that there were certain features of the case Further, it was settled in the case of CIT vs. Durga Prasad More 82 serving recitals in a document, it is for that party to establish the truth of these recitals. It was further held by the Apex Court in this case that the tax authorities are entitled to look into the surrounding circumstances to In the case of M/s Kachwala Gems V/ JCIT ITA No 134/JP/2002 dated 10/12/2003, which has been affirmed by the Supreme Court in the case of M/.Kachwala Gems V/s JCIT (2006) 20 SC)585,288 IT 10(SC), it was held that payment by account payee cheque is not sufficient to establish the genuineness of Further, in the case of CIT Vs Prashant (P)(1994) 121 CTR (Cal) 20, the Calcutta High Court has held that even payment by account payee cheque is not sacrosanct and it would not make an otherwise Further, the contention of the appellant that they were not provided with the opportunity to cross examination of the third party whose elied by the Assessing Officer is also not acceptable. As stated above the DDIT and the AO had reached to the conclusion that the transactions entered by the appellant with M/s Moulimani Sun Diam, controlled and operated by Shri dra Jain were bogus, not only on the statement of Shri Rajendra Jain and the persons whose statements were recorded by the DDIT, but it was also on the basis/findings during the search/post search and the assessment proceedings by the A the conclusion that the transactions entered by the appellant M/s Moulimani Impex Pvt Ltd and M/s. Sun Diam, were controlled and operated by Shri Rajendra Jain were bogus. The appellant has failed to furnish/explain/prove the creditworthiness of ulimani Impex Pvt Ltd and M/s. Sun Diam, with whom he This further, proves that the finding of the search/post search proceedings and the observation of the Assessing Officer during the statement given by Shri Rajendra Jain that no real business was conducted in any of the firms/companies /entities which were operated from his In this regard, it would be pertinent to state that the Apex Court in the case of M/s. (Del) 295) has stated that "The right of cross examination is not an absolute right". The Hon'ble Supreme Court has also held that the right of hearing does not necessarily include right of cross examination. The right o circumstances of each case and also on the statute concerned (State of I&K vs. Bakshi Gulam Mohammad AIR 1967 SC 122). The question whether the assessee is entitled to cross examination is a question which may large circumstances of the case (ef. Shyamlal Biri Merchant vs 68 ELT 548, 551(All In the present case no such circumstances are warranted as in the list of beneficiaries to whom accommodation entries were provided by the said group categorically contains the name and address of the relevant concerns. Further the group has categorically have provided accommodation entries of unsecured loans through various benami concerns. The Hon'ble Rajasthan High Court in the case of Rameshwarlal Mali vs. CIT 256 ITR 536(Raj.) has held that "there is no provision for permitting the cross ex were recorded during survey." In CIT v. Metal Products of India (1984) 150 IT 714 (P&), it was held that the AO may gather information in any manner he likes, behind the back of the assessee and utilize the same ag even if it does not, in all respects satisfy the requirements of the Indian Evidence Act. What is necessary is that he should have material upon which to base the assessment; "material" as distinguished from circumstantial evidence. In the case of Khujji @ Surendra Tiwari versus The State of Madhya Pradesh (Order dated 167.1991) 1991 AIR 1853, the Supreme Court held... The evidence of such witness or washed off the reco the extent their version is found to be dependable on a careful scrutiny thereof." Therefore, after considering all the above facts, and the ratio laid down by the Hon'ble Supreme Court in the case of NK Protei DCIT (2017) 292 CTR 354 (SC), I am of the considered view that the Assessing Officer is right in making addition towards 100% of bogus purchases from the M/s Moulimani Impex Pvt Ltd and M/s. Sun Diam, which were controlled and operated by Shri Ra The entire addition made by the Assessing Officer is upheld. Hence, the ground of appeal is dismissed. In this regard, it would be pertinent to state that the Apex Court in the case of M/s. Nath International sales vs, Union of India AIR 1992 (Del) 295) has stated that "The right of cross examination is not an absolute right". The Hon'ble Supreme Court has also held that the right of hearing does not necessarily include right of cross examination. The right of cross examination must depend upon the circumstances of each case and also on the statute concerned (State of I&K vs. Bakshi Gulam Mohammad AIR 1967 SC 122). The question whether the assessee is entitled to cross examination is a question which may largely depends on the facts and circumstances of the case (ef. Shyamlal Biri Merchant vs. UOI (1993) 68 ELT 548, 551(All.) In the present case no such circumstances are warranted as in the list of beneficiaries to whom accommodation entries were provided by the said group categorically contains the name and address of the relevant concerns. Further the group has categorically admitted to have provided accommodation entries of unsecured loans through various benami concerns. The Hon'ble Rajasthan High Court in the case of Rameshwarlal Mali vs. CIT 256 ITR 536(Raj.) has held that "there is no provision for permitting the cross examination of the persons whose statements were recorded during survey." In CIT v. Metal Products of India (1984) 150 IT 714 (P&), it was held that the AO may gather information in any manner he likes, behind the back of the assessee and utilize the same against the assessee, even if it does not, in all respects satisfy the requirements of the Indian Evidence Act. What is necessary is that he should have material upon which to base the assessment; "material" as distinguished from "evidence" which includes direct and circumstantial evidence. In the case of Khujji @ Surendra Tiwari versus The State of Madhya Pradesh (Order dated 167.1991) 1991 AIR 1853, the Supreme Court held... The evidence of such witness-es cannot be treated as effaced or washed off the record altogether but the same can be accepted to the extent their version is found to be dependable on a careful scrutiny thereof." Therefore, after considering all the above facts, and the ratio laid down by the Hon'ble Supreme Court in the case of NK Protei DCIT (2017) 292 CTR 354 (SC), I am of the considered view that the Assessing Officer is right in making addition towards 100% of bogus purchases from the M/s Moulimani Impex Pvt Ltd and M/s. Sun Diam, which were controlled and operated by Shri Rajendra Jain. The entire addition made by the Assessing Officer is upheld. Hence, the ground of appeal is dismissed.” 1616 & 1618/M/2023 8 Purna Pushottam Exports In this regard, it would be pertinent to state that the Apex Court in l sales vs, Union of India AIR 1992 (Del) 295) has stated that "The right of cross examination is not an absolute right". The Hon'ble Supreme Court has also held that the right of hearing does not necessarily include right of cross f cross examination must depend upon the circumstances of each case and also on the statute concerned (State The question whether the assessee is entitled to cross examination is ly depends on the facts and . UOI (1993) In the present case no such circumstances are warranted as in the list of beneficiaries to whom accommodation entries were provided by the said group categorically contains the name and address of the admitted to have provided accommodation entries of unsecured loans through The Hon'ble Rajasthan High Court in the case of Rameshwarlal Mali vs. CIT 256 ITR 536(Raj.) has held that "there is no provision for amination of the persons whose statements In CIT v. Metal Products of India (1984) 150 IT 714 (P&), it was held that the AO may gather information in any manner he likes, behind ainst the assessee, even if it does not, in all respects satisfy the requirements of the Indian Evidence Act. What is necessary is that he should have material upon which to base the assessment; "material" as rect and In the case of Khujji @ Surendra Tiwari versus The State of Madhya Pradesh (Order dated 167.1991) 1991 AIR 1853, the Supreme Court es cannot be treated as effaced rd altogether but the same can be accepted to the extent their version is found to be dependable on a careful Therefore, after considering all the above facts, and the ratio laid down by the Hon'ble Supreme Court in the case of NK Proteins Ltd vS DCIT (2017) 292 CTR 354 (SC), I am of the considered view that the Assessing Officer is right in making addition towards 100% of bogus purchases from the M/s Moulimani Impex Pvt Ltd and M/s. Sun jendra Jain. The entire addition made by the Assessing Officer is upheld. Hence, 5.1 Before us, the Ld. Counsel of the assessee submitted that identical issue of bogus purchases from raised in assessment year 2008 made addition of Rs.13,00,556/ in ITA No. 1617/Mum/2023 for assessment year 2008 upheld the addition of 4% submitted that disall also be restricted to 4% of the bogus purchases. 5.2 We have heard rival submission of the parties on the issue in dispute and perused the relevant material on record. We find that in the year under considerat disallowed the entire purchases amounting to Rs.157,77,791/ from M/s Moulimani Impex Pvt. Ltd. and M/s Sun Diam, the concern which were controlled by Shri Rajendra Jain Group. The contention of the assessee before us, that d bogus purchases should be restricted to the 4% of the quantum of bogus purchases as held by the Tribunal in the case of the assessee for assessment year 2008 reproduced as under: “6. The ground No.3 to 6 of appeal are in respect of single issue i.e. addition of Rs. 13,00,556/ addition has been made in the hands of assessee for obtaining accommodation entries to the tune of Rs. 13,00,556/ Exports Pvt. Ltd., a group concern of Rajendra Jain. Undisputedly, the assessee failed to discharge its onus in proving genuineness of purchases made from said company. Thus, the Assessing Officer made addition of the entire such purchases. It is e Assessing Officer accepted sales declared by the assessee . No discrepancy was pointed by the Assessing Officer with respect to the Before us, the Ld. Counsel of the assessee submitted that identical issue of bogus purchases from ‘Rajendra Jain Group ssessment year 2008-09 by the Assessing Officer and made addition of Rs.13,00,556/-. On further appeal in ITA No. 1617/Mum/2023 for assessment year 2008 the addition of 4% of the bogus purchases. He accordingly submitted that disallowance in the year under consideration should be restricted to 4% of the bogus purchases. We have heard rival submission of the parties on the issue in dispute and perused the relevant material on record. We find that in the year under consideration, the Assessing Officer has disallowed the entire purchases amounting to Rs.157,77,791/ from M/s Moulimani Impex Pvt. Ltd. and M/s Sun Diam, the concern which were controlled by Shri Rajendra Jain Group. The contention of the assessee before us, that disallowance in respect of bogus purchases should be restricted to the 4% of the quantum of bogus purchases as held by the Tribunal in the case of the assessee for assessment year 2008-09. The relevant finding of the Tribunal is reproduced as under: ground No.3 to 6 of appeal are in respect of single issue i.e. addition of Rs. 13,00,556/- made on account of bogus purchases. The addition has been made in the hands of assessee for obtaining accommodation entries to the tune of Rs. 13,00,556/- from M/s. Exports Pvt. Ltd., a group concern of Rajendra Jain. Undisputedly, the assessee failed to discharge its onus in proving genuineness of purchases made from said company. Thus, the Assessing Officer made addition of the entire such purchases. It is equally true that the Assessing Officer accepted sales declared by the assessee . No discrepancy was pointed by the Assessing Officer with respect to the 1616 & 1618/M/2023 9 Purna Pushottam Exports Before us, the Ld. Counsel of the assessee submitted that Rajendra Jain Group’ was 09 by the Assessing Officer and . On further appeal, the Tribunal in ITA No. 1617/Mum/2023 for assessment year 2008-09 of the bogus purchases. He accordingly owance in the year under consideration should We have heard rival submission of the parties on the issue in dispute and perused the relevant material on record. We find that ion, the Assessing Officer has disallowed the entire purchases amounting to Rs.157,77,791/- from M/s Moulimani Impex Pvt. Ltd. and M/s Sun Diam, the concern which were controlled by Shri Rajendra Jain Group. The isallowance in respect of bogus purchases should be restricted to the 4% of the quantum of bogus purchases as held by the Tribunal in the case of the assessee 09. The relevant finding of the Tribunal is ground No.3 to 6 of appeal are in respect of single issue i.e. made on account of bogus purchases. The addition has been made in the hands of assessee for obtaining from M/s. Sparsh Exports Pvt. Ltd., a group concern of Rajendra Jain. Undisputedly, the assessee failed to discharge its onus in proving genuineness of purchases made from said company. Thus, the Assessing Officer made qually true that the Assessing Officer accepted sales declared by the assessee . No discrepancy was pointed by the Assessing Officer with respect to the inventory. Thus, without purchases there cannot be sales. The possibility of assessee procuring diamond ruled out. The Hon'ble Bombay High Court in the case of PCIT vs. Paramshakhti Distributors Pvt. Ltd. in Income Tax Appeal No.413 of 2017 decided on 15/07/2019 has held that in such like transactions entire purchases cannot be a purchases covered by bogus bills that can be added. Taking into consideration entire facts, the suppressed profit on bogus purchases is estimated at 4%. The Assessing Officer is directed to restrict addition on bogus purchases, accordingly. Consequently, ground No.3 to 6 of appeal are partly allowed. 5.3 We find that in the assessment year 2008 made in the case of the assessee entries of Rs.13,00,556/ group concern of Shri Rajendra Jain. The issue in dispute involved in the year under consideration is identical and therefore, following the finding of the Tribunal of the bogus purchases is sustained. The grounds of appeal of the assessee are accordingly partly allowed. 6. Now, we take up the appeal of the assessee for assessment year 2018-19. The grounds raised by the assessee are as under: 1. The Ld. Commissioner of Income Tax (Appeals) erred in passing the order dated 05.04.2023 without providing the Appellant an appropriate opportunity to make submissions and attend the hearing. Thus, order dated 05.04.2023 has been pass breach of principles of natural justice. Hence, the same is bad law and may be set 2. 2. The Ld. CIT(A) erred in confirming the action of the A.O. of making addition of Rs.4,02,01,020/ Income tax Act, 1961 (the Act) circumstances of the case. Thus, the addition of Rs.4,02,01,020/ under section 69C of the Act and levy of tax as per the provisions of section 115BBE of the Act is not at all justified and the same may be deleted. 3. 3. The survey under section 133A of the Act no discrepancy was found inventory. Thus, without purchases there cannot be sales. The possibility of assessee procuring diamonds from grey market cannot be ruled out. The Hon'ble Bombay High Court in the case of PCIT vs. Paramshakhti Distributors Pvt. Ltd. in Income Tax Appeal No.413 of 2017 decided on 15/07/2019 has held that in such like transactions entire purchases cannot be added. It is only the profit embedded in purchases covered by bogus bills that can be added. Taking into consideration entire facts, the suppressed profit on bogus purchases is estimated at 4%. The Assessing Officer is directed to restrict addition on purchases, accordingly. Consequently, ground No.3 to 6 of appeal are partly allowed.” We find that in the assessment year 2008-09 also the addition made in the case of the assessee for obtaining accommodation entries of Rs.13,00,556/- from M/s Sparsh Export Pvt. Ltd. group concern of Shri Rajendra Jain. The issue in dispute involved in the year under consideration is identical and therefore, following the finding of the Tribunal (supra), the addition to the extent of 4% of the bogus purchases is sustained. The grounds of appeal of the assessee are accordingly partly allowed. we take up the appeal of the assessee for assessment 19. The grounds raised by the assessee are The Ld. Commissioner of Income Tax (Appeals) erred in passing the order dated 05.04.2023 without providing the Appellant an appropriate opportunity to make submissions and attend the hearing. Thus, order dated 05.04.2023 has been pass breach of principles of natural justice. Hence, the same is bad law and may be set-a-side. 2. The Ld. CIT(A) erred in confirming the action of the A.O. of making addition of Rs.4,02,01,020/- under section 69C of the Income tax Act, 1961 (the Act) without appreciating the facts and circumstances of the case. Thus, the addition of Rs.4,02,01,020/ under section 69C of the Act and levy of tax as per the provisions of section 115BBE of the Act is not at all justified and the same may be deleted. Ld. CIT(A) failed to appreciate during the course of the survey under section 133A of the Act no discrepancy was found 1616 & 1618/M/2023 10 Purna Pushottam Exports inventory. Thus, without purchases there cannot be sales. The s from grey market cannot be ruled out. The Hon'ble Bombay High Court in the case of PCIT vs. Paramshakhti Distributors Pvt. Ltd. in Income Tax Appeal No.413 of 2017 decided on 15/07/2019 has held that in such like transactions dded. It is only the profit embedded in purchases covered by bogus bills that can be added. Taking into consideration entire facts, the suppressed profit on bogus purchases is estimated at 4%. The Assessing Officer is directed to restrict addition on purchases, accordingly. Consequently, ground No.3 to 6 of 09 also the addition obtaining accommodation Export Pvt. Ltd. i.e. a group concern of Shri Rajendra Jain. The issue in dispute involved in the year under consideration is identical and therefore, following , the addition to the extent of 4% of the bogus purchases is sustained. The grounds of appeal of the we take up the appeal of the assessee for assessment 19. The grounds raised by the assessee are reproduced The Ld. Commissioner of Income Tax (Appeals) erred in passing the order dated 05.04.2023 without providing the Appellant an appropriate opportunity to make submissions and attend the hearing. Thus, order dated 05.04.2023 has been passed in breach of principles of natural justice. Hence, the same is bad-in- 2. The Ld. CIT(A) erred in confirming the action of the A.O. of under section 69C of the without appreciating the facts and circumstances of the case. Thus, the addition of Rs.4,02,01,020/- under section 69C of the Act and levy of tax as per the provisions of section 115BBE of the Act is not at all justified and the same Ld. CIT(A) failed to appreciate during the course of the survey under section 133A of the Act no discrepancy was found in the physical quantity of stock stock found during the course of survey was duly recorded in the books of accounts. The value of the stock was also reflected in the regular books of account as per the consistent method of valuation of stock followed by the Appellant. Thus, Rs. 4,02,01,020/ provisions of section present case. Hence, addition made invoking section 69Cof the Act and the levy of tax under section 115BBE of the Act is not at all justified and the same may be deleted. 4. 4. Without prejudice to the above the Ld. appreciate that A.O. has erred in treating an amount of Rs.4,02,01,020/ of the Act without appreciating the fact that during the course of the survey or investigation thereafter, no evidence wa the Appellant has paid Rs. 40,919/ stock of 7277.5 carats of diamonds. Thus, the addition of Rs.4,02,01,020/ justified and levy of tax under section 115BBE of the Act is h arbitrary. Thus, the addition of Rs.4,02,01,020/ 5. Without prejudice to the above, the Ld. CITIA) failed to appreciate that a statement on oath cannot be recorded during the course of survey proceedings and that any forced acceptance d course of survey on the basis of loose papers / diaries without any incriminating evidence, holds no evidentiary value. Thus, the addition made u/s 69C of the Act may please be deleted. 6.1 Briefly stated facts of the case are that in the case of action u/s 133A of the was found in which two different valuation of the closing stock was made. First, valuation which was claimed to be as per books of accounts valuation was made was claimed to be the actual rate per carat the entries in the notebook Dinesh Kalathiya agreed to offer differenc Rs.4,02,01,020/- as undisclosed profit for the year under consideration. In the return of income filed for the year under consideration, while in the physical quantity of stock-in-trade of the Appellant i.e. the stock found during the course of survey was duly recorded in the oks of accounts. The value of the stock was also reflected in the regular books of account as per the consistent method of valuation of stock followed by the Appellant. Thus, Rs. 4,02,01,020/- is not an unexplained expenditure. Thus, provisions of section 69C are not attracted to the facts of the present case. Hence, addition made invoking section 69Cof the Act and the levy of tax under section 115BBE of the Act is not at all justified and the same may be deleted. 4. Without prejudice to the above the Ld. CIT(A) failed to appreciate that A.O. has erred in treating an amount of Rs.4,02,01,020/- as unexplained expenditure under section 69C of the Act without appreciating the fact that during the course of the survey or investigation thereafter, no evidence wa the Appellant has paid Rs. 40,919/- per carats to purchase the stock of 7277.5 carats of diamonds. Thus, the addition of Rs.4,02,01,020/- under section 69C of the Act is not at all justified and levy of tax under section 115BBE of the Act is h arbitrary. Thus, the addition of Rs.4,02,01,020/- may be deleted. Without prejudice to the above, the Ld. CITIA) failed to appreciate that a statement on oath cannot be recorded during the course of survey proceedings and that any forced acceptance d course of survey on the basis of loose papers / diaries without any incriminating evidence, holds no evidentiary value. Thus, the addition made u/s 69C of the Act may please be deleted. Briefly stated facts of the case are that in the case of action u/s 133A of the Act carried out on 16.02.2018. a was found in which two different valuation of the closing stock was valuation was at the rate of Rs.35,395/ which was claimed to be as per books of accounts valuation was made at the rate of Rs. 40,919/- per carat , was claimed to be the actual rate per carat of diamonds the entries in the notebook, the Partner of the assessee firm agreed to offer difference of two valuation as undisclosed profit for the year under n the return of income filed for the year under while computing business profit, the assessee taken 1616 & 1618/M/2023 11 Purna Pushottam Exports trade of the Appellant i.e. the stock found during the course of survey was duly recorded in the oks of accounts. The value of the stock was also reflected in the regular books of account as per the consistent method of valuation of stock followed by the Appellant. Thus, Rs. is not an unexplained expenditure. Thus, 69C are not attracted to the facts of the present case. Hence, addition made invoking section 69Cof the Act and the levy of tax under section 115BBE of the Act is not at CIT(A) failed to appreciate that A.O. has erred in treating an amount of as unexplained expenditure under section 69C of the Act without appreciating the fact that during the course of the survey or investigation thereafter, no evidence was found that per carats to purchase the stock of 7277.5 carats of diamonds. Thus, the addition of under section 69C of the Act is not at all justified and levy of tax under section 115BBE of the Act is highly may be deleted. Without prejudice to the above, the Ld. CITIA) failed to appreciate that a statement on oath cannot be recorded during the course of survey proceedings and that any forced acceptance during the course of survey on the basis of loose papers / diaries without any incriminating evidence, holds no evidentiary value. Thus, the addition made u/s 69C of the Act may please be deleted. Briefly stated facts of the case are that in the case of survey Act carried out on 16.02.2018. a notebook was found in which two different valuation of the closing stock was Rs.35,395/- per carat, which was claimed to be as per books of accounts and another per carat , which of diamonds. In view of Partner of the assessee firm Shri of two valuation of as undisclosed profit for the year under n the return of income filed for the year under business profit, the assessee taken into consideration, the said disclosure of th , the Assessing Officer while passing the order u/s 143(3) dated 21.06.2021, reduced separately added as unexplained expenditure of the Act and invoked applying tax rate of 60% on said amount of Rs.4,02,01,020/ further appeal, the Ld. CIT(A) upheld the action of the Assessing Officer observing as under: “5. Appellate Decision: I have carefully perused the fact raised by the appellant and the order of the Assessing Officer. It is seen from the facts of the case that the appellant has not disputed the issue of valuation and the notings in the fortune note book pertaining to the closing stock found during the course of survey us 133A. It is also a fact that the difference of the valuation was offered by the assessee in the valuation of closing stock for the twer, Televant assessment year. This conduct of the appellant clearly pro closing stock. Further, it is seen from the submission of the appellant that even though it had offered the difference in the valuation of the closing stock, the source of the same was not explained by the appellant. Further item wise, carat wise, colour wise, clarity wise breakup of his opening stock, purchases made during the year, sales made during the year and the closing stock. The appellant has not furnished purchase evidences serine report explaining and proving the detail of purchase wise valuation. 5.1 Considering the above facts, since the appellant failed to explain the source of purchase in the valuation of closing stock with supporting documentary evidence Officer has rightly added the sum of Rs. 4,02,01,020/ difference of the valuation of the closing stock w/ 69C of the IT Act. The order of the Assessing Officer is upheld. This ground raised by th appellant is dismissed. 6.2 The Ld. CIT(A) further upheld the application of section 115BBE of the Act observing as under: into consideration, the said disclosure of the undisclosed profit. But he Assessing Officer while passing the order u/s 143(3) dated d the said profit from the business income and separately added as unexplained expenditure/investment u/s 69C of the Act and invoked provisions of section 115BBE of the Act tax rate of 60% on said amount of Rs.4,02,01,020/ further appeal, the Ld. CIT(A) upheld the action of the Assessing Officer observing as under: “5. Appellate Decision: I have carefully perused the facts of the case, the grounds of appeal raised by the appellant and the order of the Assessing Officer. It is seen from the facts of the case that the appellant has not disputed the issue of valuation and the notings in the fortune note book pertaining to the closing stock found during the course of survey us 133A. It is also a fact that the difference of the valuation was offered by the assessee in the valuation of closing stock for the twer, Televant assessment year. This conduct of the appellant clearly proves that It had undervalued its closing stock. Further, it is seen from the submission of the appellant that even though it had offered the difference in the valuation of the closing stock, the source of the same was not explained by the Further, it is also seen that the appellant had not furnished item wise, carat wise, colour wise, clarity wise breakup of his opening stock, purchases made during the year, sales made during the year and the closing stock. The appellant has not furnished purchase evidences serine report explaining and proving the detail of purchase wise valuation. 5.1 Considering the above facts, since the appellant failed to explain the source of purchase in the valuation of closing stock with supporting documentary evidences, I am of the considered view that the Assessing Officer has rightly added the sum of Rs. 4,02,01,020/ difference of the valuation of the closing stock w/ 69C of the IT Act. The order of the Assessing Officer is upheld. This ground raised by th appellant is dismissed.” The Ld. CIT(A) further upheld the application of section 115BBE of the Act observing as under: 1616 & 1618/M/2023 12 Purna Pushottam Exports undisclosed profit. But he Assessing Officer while passing the order u/s 143(3) dated the said profit from the business income and /investment u/s 69C provisions of section 115BBE of the Act tax rate of 60% on said amount of Rs.4,02,01,020/-. On further appeal, the Ld. CIT(A) upheld the action of the Assessing s of the case, the grounds of appeal raised by the appellant and the order of the Assessing Officer. It is seen from the facts of the case that the appellant has not disputed the issue of valuation and the notings in the fortune note book pertaining to the closing stock found during the course of survey us 133A. It is also a fact that the difference of the valuation was offered by the assessee in the valuation of closing stock for the twer, Televant assessment year. This ves that It had undervalued its closing stock. Further, it is seen from the submission of the appellant that even though it had offered the difference in the valuation of the closing stock, the source of the same was not explained by the , it is also seen that the appellant had not furnished item wise, carat wise, colour wise, clarity wise breakup of his opening stock, purchases made during the year, sales made during the year and the closing stock. The appellant has not furnished purchase wise evidences serine report explaining and proving the detail of purchase 5.1 Considering the above facts, since the appellant failed to explain the source of purchase in the valuation of closing stock with supporting s, I am of the considered view that the Assessing Officer has rightly added the sum of Rs. 4,02,01,020/- being the difference of the valuation of the closing stock w/ 69C of the IT Act. The order of the Assessing Officer is upheld. This ground raised by the The Ld. CIT(A) further upheld the application of section “7.1 The appellant in this ground has raised the issue that the AO had completed the assessment proceeding by taxing the differenc valuation of closing stock which was accepted during the course of survey action to buy peace with the department as unexplained expenditure us 69C of the IT Act when the same was already added by the appellant and offered under the head business 7.2 I have carefully perused the facts of the case, the grounds of appeal raised by the appellant and the order of the Assessing Officer. In the case appellant survey us 133A of the Act was conducted during which certain fortune note books in the books of accounts. same in the valuation of closing stock as an additional income over and above the normal income of the appellant. 7.3 In my considered view, amount which was earned, from where the difference in the closing stock was detected, was earned during the regular course of business. The onus was on the appellant to establish the source of the surrendered inc income w/s 69C of the Act, which the appellant failed to do so. 7.4 As discussed in the above ground it is seen that the appellant though offered the difference in the valuation of the closing stock, h failed to explain the source of purchase in the valuation of closing stock with supporting documentary evidences and such discrepancies attract the provision of section 69C of the LIT. Act for computing the income u/s.115BBE of the IT Act. The ground ra accordingly, dismissed. 6.3 Before us, the Ld. Counsel of the assessee submitted that during the course of survey no stock was found and per the books of accounts and the survey. According to him expenditure noticed by the Assessing Officer therefore, invoking of section 115BBE is not justified. The Ld. Counsel of the ass relied on the decision in the case of [1953] 24 ITR 481 (SC) DCIT [2020] 116 taxmann.com 930 (Jaipur 7.1 The appellant in this ground has raised the issue that the AO had completed the assessment proceeding by taxing the differenc valuation of closing stock which was accepted during the course of survey action to buy peace with the department as unexplained expenditure us 69C of the IT Act when the same was already added by the appellant and offered under the head business and profession. 7.2 I have carefully perused the facts of the case, the grounds of appeal raised by the appellant and the order of the Assessing Officer. In the case appellant survey us 133A of the Act was conducted during which certain fortune note books were found, entries therein were not recorded in the books of accounts. Accordingly, the appellant had offered the same in the valuation of closing stock as an additional income over and above the normal income of the appellant. 7.3 In my considered view, the appellant had failed to prove that the amount which was earned, from where the difference in the closing stock was detected, was earned during the regular course of business. The onus was on the appellant to establish the source of the surrendered income failing which it needs to be categorized as deemed income w/s 69C of the Act, which the appellant failed to do so. 7.4 As discussed in the above ground it is seen that the appellant though offered the difference in the valuation of the closing stock, h failed to explain the source of purchase in the valuation of closing stock with supporting documentary evidences and such discrepancies attract the provision of section 69C of the LIT. Act for computing the income u/s.115BBE of the IT Act. The ground raised by the appellant is accordingly, dismissed.” Before us, the Ld. Counsel of the assessee submitted that during the course of survey no difference in the quantity of the and difference was only on account of valuation as s of accounts and valuation of stock as on the date of the survey. According to him, there was no unexplained expenditure noticed by the Assessing Officer therefore, invoking of section 115BBE is not justified. The Ld. Counsel of the ass relied on the decision in the case of Shainrup Sampatram v. CIT [1953] 24 ITR 481 (SC) and in the case of Stone Age (P.) Ltd. v. DCIT [2020] 116 taxmann.com 930 (Jaipur-Trib.). 1616 & 1618/M/2023 13 Purna Pushottam Exports 7.1 The appellant in this ground has raised the issue that the AO had completed the assessment proceeding by taxing the difference in the valuation of closing stock which was accepted during the course of survey action to buy peace with the department as unexplained expenditure us 69C of the IT Act when the same was already added by and profession. 7.2 I have carefully perused the facts of the case, the grounds of appeal raised by the appellant and the order of the Assessing Officer. In the case appellant survey us 133A of the Act was conducted during which were found, entries therein were not recorded Accordingly, the appellant had offered the same in the valuation of closing stock as an additional income over and the appellant had failed to prove that the amount which was earned, from where the difference in the closing stock was detected, was earned during the regular course of business. The onus was on the appellant to establish the source of the ome failing which it needs to be categorized as deemed income w/s 69C of the Act, which the appellant failed to do so. 7.4 As discussed in the above ground it is seen that the appellant though offered the difference in the valuation of the closing stock, had failed to explain the source of purchase in the valuation of closing stock with supporting documentary evidences and such discrepancies attract the provision of section 69C of the LIT. Act for computing the income ised by the appellant is Before us, the Ld. Counsel of the assessee submitted that difference in the quantity of the difference was only on account of valuation as as on the date of there was no unexplained expenditure noticed by the Assessing Officer therefore, invoking of section 115BBE is not justified. The Ld. Counsel of the assessee Shainrup Sampatram v. CIT Stone Age (P.) Ltd. v. . 6.3.1 The Ld. Counsel of the assessee also referred to page 107 of the Paper Book, which is working of the closing stock for the purpose of profit and loss account including the undisclosed profit. 6.4 We have heard rival submission and perused the relevant material on record. It is undisputed that no difference in quantity of the stock was found during the course of the survey. The Assessing Officer has referred only difference in the case of the Assessing Officer that any of the purchases were not found to be recorded in the books of accounts. The valuation as on the date of the survey as compared to the valuation at the time of purchase the time of recording to offer the said profit during the assessee has enhanced value of the closing stock as on the date of the survey and included profit. In such scenario, the said disclosure would be in the nature of bu unexplained expenditure to be taxed u/s 115BBE of the Act invoking of the said section by the Assessing Officer is without substantiating that any of the unexplained purchases. The sources of the purchases by the assessee are duly explained and only assessee has offered the difference in valuation of the stock and said valuation was recorded by the assessee in the note found during the course of survey. In The Ld. Counsel of the assessee also referred to page 107 which is working of the closing stock for the pose of profit and loss account including the undisclosed profit. We have heard rival submission and perused the relevant material on record. It is undisputed that no difference in quantity of he stock was found during the course of the survey. The Assessing Officer has referred only difference in valuation of stock. It is not the case of the Assessing Officer that any of the purchases were not found to be recorded in the books of accounts. The difference in the valuation as on the date of the survey as compared to the valuation time of purchase comprises in the profit and loss account at sales. Therefore, the assessee was not required to offer the said profit during the year under consideration. Despite the assessee has enhanced value of the closing stock as on the date included the same for the purpose of declaring profit. In such scenario, the said disclosure would be the nature of business profit and it cannot be unexplained expenditure to be taxed u/s 115BBE of the Act invoking of the said section by the Assessing Officer is without any purchase of the assessee was in the nature purchases. The sources of the purchases by the assessee are duly explained and only assessee has offered the difference in valuation of the stock and said valuation was recorded by the assessee in the note found during the course of survey. In 1616 & 1618/M/2023 14 Purna Pushottam Exports The Ld. Counsel of the assessee also referred to page 107 which is working of the closing stock for the pose of profit and loss account including the undisclosed profit. We have heard rival submission and perused the relevant material on record. It is undisputed that no difference in quantity of he stock was found during the course of the survey. The Assessing of stock. It is not the case of the Assessing Officer that any of the purchases were not difference in the valuation as on the date of the survey as compared to the valuation the profit and loss account at sales. Therefore, the assessee was not required the year under consideration. Despite the assessee has enhanced value of the closing stock as on the date the same for the purpose of declaring profit. In such scenario, the said disclosure would be at maximum cannot be treated as unexplained expenditure to be taxed u/s 115BBE of the Act. The invoking of the said section by the Assessing Officer is without purchase of the assessee was in the nature purchases. The sources of the purchases by the assessee are duly explained and only assessee has offered the difference in valuation of the stock and said valuation was recorded by the assessee in the note found during the course of survey. In the facts and circumstances discussed above, we set aside the order of the Ld. CIT(A) on the Officer to cancel the action of the taxing the undisclosed profit declared by the assessee appeal of the assessee are accordingly allowed. 7. In the result, the appeal of the assessee for assessment year 2007-08 is partly allowed whereas appeal for assessment year 2018-19 is allowed. Order pronounced in the open Court on Sd/ (SANDEEP SINGH KARHAIL JUDICIAL MEMBER Mumbai; Dated: 28/08/2023 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// d circumstances discussed above, we set aside the order on the issue in dispute and direct the Assessing the action of the taxing the undisclosed profit by the assessee u/s 115BBE of the Act. The grounds of al of the assessee are accordingly allowed. In the result, the appeal of the assessee for assessment year 08 is partly allowed whereas appeal for assessment year nounced in the open Court on 28/08/2023. Sd/- Sd/ SANDEEP SINGH KARHAIL) (OM PRAKASH KANT) JUDICIAL MEMBER ACCOUNTANT MEMBER Copy of the Order forwarded to : BY ORDER, (Assistant Registrar) ITAT, Mumbai 1616 & 1618/M/2023 15 Purna Pushottam Exports d circumstances discussed above, we set aside the order issue in dispute and direct the Assessing the action of the taxing the undisclosed profit u/s 115BBE of the Act. The grounds of In the result, the appeal of the assessee for assessment year 08 is partly allowed whereas appeal for assessment year /08/2023. Sd/- (OM PRAKASH KANT) ACCOUNTANT MEMBER BY ORDER, (Assistant Registrar) ITAT, Mumbai