Ashok Saraf HUF, Kolkata V. ITO, Ward-29(4), Kolkata, Kolkata

ITA 2157/KOL/2019

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 0680 (ITAT-KOLKATA)
• Duration Of Justice: 3 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-12-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Next Hearing Date: 21-11-2019
• Assessment Year: 2007-2008
• Appeal Filed On: 18-09-2019
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: JAYANTA KHANRA JCIT LD
• Assessee Lawyers: SUBASH AGARWAL LD
• Keywords: Bogus purchase; Source of fund; Valuation report; Accommodation entries; TDS
• Section: 69

Judgement Text

1 I.T.A NO.2157/KOL/2019 A.Y 2007-08 ASHOK SARAF HUF IN THE INCOME TAX APPELLATE TRIBUNAL B-SMCBENCH: KOLKATA [BEFORE SHRI A. T. VARKEY, JM ] I.TA NO. 2157/KOL/2019 A.Y 2007-08 ASHOK SARAF HUF PAN: AAFHA 0566C VS. I.T.O., WARD 29(4), KOLKATA APPELLANT RESPONDENT DATE OF HEARING 21.11.2019 DATE OF PRONOUNCEMENT 20.12.2019 FOR THE APPELLANT SHRI SUBASH AGARWAL, ADVOCATE, L D.AR FOR THE RESPONDENT SHRI JAYANTA KHANRA, JCIT, LD. SR.DR ORDER PER SHRI A.T. VARKEY, JM THIS APPEAL IS PREFERRED BY THE ASSESSEE AGAINST THE ORDER OF LD. CIT (A), 12, KOLKATA DATED 21.06.2019 FOR THE ASSESSMENT YEAR 2007-08 . 2. AT THE OUTSET ITSELF, SHRI SUBASH AGARWAL, ADVOCATE, LD.AR SUBMITTED THAT HE IS NOT PRESSING GROUND NOS. 1 & 2 RAISED BY THE ASSESSEE. THEREFORE, THE SAME STANDS DISMISSED. 3. GROUND NO. 3 RAISED BY THE ASSESSEE IS AGAINST THE ACTION OF THE LD. CIT(A) IN CONFIRMING THE ADDITION OF RS. 1,11,278/- MADE BY THE AO TREAT ING THE SAME AS BOGUS PURCHASE OF JEWELLERY. 4. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE H AD FILED HIS RETURN OF INCOME FOR A.Y 2007-08 ON 06-10-2017 DECLARING A TOTAL INCOME OF RS. 1,91, 720/-. THE RETURN WAS PROCESSED ON 16-10- 2008. THEREAFTER, THE AO NOTES THAT HE RECEIVED A N INFORMATION FROM THE DGIT (INV), MUMBAI THAT THE ASSESSEE HAD TAKEN BOGUS ACCOMMODAT ION ENTRIES IN-RESPECT OF PURCHASE OF JEWELLERY FROM M/S. VIRAG JEWELS DURING THE A.Y UND ER CONSIDERATION AND THE SAME WAS REVEALED DURING SEARCH & SEIZURE OPERATION ON 03- 10-2013 AT THE PREMISES OF M/S. VIRAG GROUP OF CONCERNS. ACCORDING TO THE AO, EVIDENCE(S )/ STATEMENT(S) WERE COLLECTED FROM VARIOUS PERSONS WHICH WERE RECORDED DURING SAID SEA RCH & SEIZURE OPERATION, WHICH UNEARTHED SHRI RAVINDRA JAINS CONCERNS [M/S. VIRAG JEWELLERY ] INVOLVEMENT IN PROVIDING 2 I.T.A NO.2157/KOL/2019 A.Y 2007-08 ASHOK SARAF HUF ACCOMMODATION ENTRIES AND THAT THE ASSESSEE HAS BEE N GIVEN THE BENEFIT OF AN AMOUNT OF RS. 1,11,278/- DURING THE A.Y 2007-08. THE AO HAS REP RODUCED THE STATEMENT(S) GIVEN BY THE PERSONS OF RAJENDRA JAIN GROUP WHICH WAS RECORDED D URING SEARCH AT PAGES-2 & 3 OF THE ASSESSMENT ORDER. THEREAFTER, THE AO CONCLUDES THAT M/S. VIRAG JEWELS GAVE BOGUS PURCHASE BILL TO THE ASSESSEE WITHOUT ACTUAL DELIVERY OF DIA MONDS BY PROVIDING ACCOMMODATION ENTRY FOR SAID BOGUS PURCHASE AND ADDED RS.1,11,278/-. TH E AO CONCLUDES AS UNDER:- 4) IN THIS CASE THE DIAMOND WAS PURCHASED BY BIL L NUMBER VJS/PD/NOV/09/2006-07 DATED 10/11/2006 AMOUNTING OF RS. 1,11,278/- FROM M/S. VIRAG JEWELS PROP: MUDIT KARNAWAT. THE PAYMENT OF THE BILL WAS MADE THOUGH CHEQUE. IT HAS BEEN CRYSTAL CLEAR FROM THE S TATEMENT GIVEN BY THE MR. RAJENDRA JAIN THE KEY PERSON OF M/S. VIRAG JEWELS T HAT THERE IS NO DELIVERY OF DIAMOND HAS BEEN MADE AGAINST THIS TYPE OF PURCHASE FROM HIS CONCERN ONLY BOGUS PURCHASE BILL WAS CREATED. THIS HAS BEEN OBVI OUS FROM THAT THE ASSESSEE DID NOT GET DELIVERY OF DIAMOND FROM M/S. VIRAG JEW ELS ONLY BOGUS PURCHASE BILL WAS CREATED FOR ACCOMMODATION ENTRIES. 5) IT IS ALSO WORTH TO MENTION THAT THE AT THE TIM E OF SURVEY OPERATION NOT A SINGLE PIECE OF DIAMOND HAS BEEN FOUND BY THE SUR VEY TEAMS AT VARIOUS OFFICE PREMISES OF RAJENDRA JAIN GROUP. ALL THESE CIRCUMST ANTIAL EVIDENCES SHOW THAT THERE IS BOGUS PURCHASE BILL AMOUNTING OF RS. 1,11, 278/- WAS CREATED BY M/S.VIRAG JEWELS FOR THE ASSESSEE WITHOUT GIVING AC TUAL DELIVERY OF DIAMONDS. THIS BILL HAS BEEN USED BY THE ASSESSEE AGAINST PUR CHASE MADE WITH UNREVEALED CASH FROM UNDISCLOSED PARTIES. THE MONEY USED FOR P URCHASE REMAIN UNEXPLAINED AND FROM THE CONDUCT OF THE ASSESSEE IT HAS ASCERTA IN THAT TOTAL TRANSACTION WAS MADE OUT OF BOOK HENCE BOGUS PURCHASE AMOUNTING OF RS.1,11,278/- ADDED TO THE INCOME OF THE ASSESSEE ON A JUSTIFIED REASONS. 5. AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEFO RE THE LD. CIT(A), WHO WAS PLEASED TO CONFIRM THE ADDITION MADE U/S. 69 OF THE INCOME- TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT BY HOLDING AS UNDER:- 2.1 I HAVE GONE THROUGH TR E WRITTEN SUBMISSION AND HEARD THE LD. A/R WHO SOUGHT TO DISCOUNT THE 'STATEMENT, RECORDED IN TH E PREMISES OF ALLEGED SUPPLIERS BY CLAIMING THAT THE STATEMENT RECORDED WAS OF THE PERSON OTHER THAN THE OWNER OR ACTUAL SELLER. LD. A/R HAS SOUGHT TO DIFFERENTI ATE BETWEEN THE SUPPLIERS, DEFACTO OWNER OF VITRAG JEWELS AND PROP. OF VITRAG JEWELS AND IS ATTEMPTING TO REASON OUT THAT THERE IS NO STATEMENT OF ACTUAL SELLER WHO HAS DELIVERED GOODS' AND TOOK PAYMENT. I AM UNABLE TO APPRECIATE THE SAI D REASONING OF THE LD.A/R. AS ESTABLISHED FROM THE SURVEY/SEARCH & SEIZURE ENQ UIRIES, THE SAID GROUP THROUGH DUMMY PERSONS BEING EMPLOYEES OF THE GROUP WAS RUNNING AN ACCOMMODATION ENTRY RACKET OF SUPPLYING: OF DIAMOND S WITHOUT ASSOCIATED DELIVERY. IF THE STATEMENTS OF THE PERSONS AND PHYS ICAL VERIFICATION CARRIED OUT AT THE SAID PREMISES PROVED ACCOMMODATION ENTRY BUSINE SS WITHOUT ANY LINKAGE TO PHYSICAL EXISTENCE OF DIAMOND, THE MODUS OPERANDI S TANDS PROVED. THE 3 I.T.A NO.2157/KOL/2019 A.Y 2007-08 ASHOK SARAF HUF CONCLUSION THAT ACCOMMODATION ENTRIES WERE TAKEN BY THE APPELLANT, IS NOT BASED ON A MERE STATEMENT BUT' HAS BEEN ESTABLISHED THRO UGH RECORDS AND PHYSICAL ENQUIRIES IN THE ASSOCIATED PREMISES. IF THEREFORE , DO NOT ACCEPT HE CLAIM OF THE LD. AIR THAT THE APPELLANT TOOK DELIVERY OF REAL D IAMOND FROM THE SAID CONCERN. THE STATEMENT OF CONCERNED PERSONS IS CORROBORATIVE , BECAUSE NON EXISTENCE OF DIAMOND AND ISSUE OF BOGUS BILLS WERE PROVED FROM R ECORDS AND PHYSICAL ABSENCE OR 'NON EXISTENCE OF DIAMOND ANY TIME OR AT THE MATERIAL TIME. I. THEREFORE, SUPPORT THE A.O'S FINDING THAT THE APPEL LANT TOOK ACCOMMODATION ENTRY AND DID NOT RECEIVE DIAMOND FROM VITRAG JEWELS THO UGH THE A.O HAS NOTED THAT PAYMENT WAS MADE IN CHEQUE. THE APPELLANT HAS ALSO ACCEPTED OR ACCORDED WITH THE A.O'S FINDING THAT THE PAYMENT WAS MADE IN CHEQUE, BUT THE SAID PAYMENT IN CHEQUE DOES NOT HELP THE APPELLANT BECA USE THE A.O'S CASE IS THAT THE ENTRY WAS TAKEN WHICH NECESSITATES PAYMENT IN CHEQ UE. IT IS THE WHOLE PURPOSE OF THE ENTRY TO CREATE A TRAIL AND SO PAYMENT TRAIL IN BANK A/CS NO WAY QUESTIONS THE A.O'S FINDING, IN VIEW OF THE ABOVE, I SUPPOR T THE A.O'S FINDING THAT ONLY ENTRY WAS TAKEN. 2.2 AS REGARDS, IMPACT OF ENTRY ON THE TOTAL INCOME , THE A.O'S DECISION APPEARS VAGUE AS HE IS NOT VERY CLEAR AS TO WHY THE SAID A MOUNT SHOULD BE TREATED AS ADDITIONAL INCOME TO BE ADDED TO THE TOTAL INCOME DECLARED BY THE ASSESSEE. SO I HAVE TO REASON OUT WHETHER THIS TRANSACTION HAS IM PLICATION FOR THE TAXABLE INCOME. AS THE APPELLANT HAS CLAIMED REPEATEDLY TH AT IT WAS IN POSSESSION OF DIAMOND OF SAID VALUE AND AS THE PAYMENT ASSOCIATED WITH THE BOGUS BILLS IS NOT THE ACTUAL PAYMENT FOR DIAMOND IT CLAIMS TO HAVE PO SSESSION OF, THE DIAMOND IT OWNS REMAINS UNEXPLAINED AS TO THE SOURCE OF ACQUIS ITION OF THAT DIAMOND. THUS THE DIAMOND POSSESSED BY THE APPELLANT REPRESENTS I TS UNDISCLOSED INCOME. THIS INCOME, , THEREFORE, NEEDS TO BE ADDED U/S.69 OF TH E I. T ACT AS THAT INVESTMENT CANNOT BE EXPLAINED BY THE CHEQUE PAYMENT ASSOCIATE D WITH THE BOGUS BILL WHICH WAS NO PAYMENT FOR THE DIAMOND ACTUALLY POSSESSED. 3. THE GROUND, THEREFORE, IS NOT ALLOWED AND THE AP PEAL IS DISMISSED. 6. AGGRIEVED, THE ASSESSEE IS BEFORE THIS TRIBUNAL. THE LD. AR ASSAILED THE DECISION OF THE LD CIT(A) AND THE LD. DR SUPPORTED THE ORDER OF THE CIT(A) AND DOES NOT WANT ME TO INTERFERE IN THE IMPUGNED ORDER. 7. I HAVE HEARD BOTH THE PARTIES AND PERUSED THE RE CORD. FROM PERUSAL OF THE CONCLUSION OF THE AO, IT IS NOTED THAT THE ASSESSEE HAD PURCHA SED DIAMOND FOR WHICH A BILL NUMBERED VJS/PD/NOV/09/2006-07 DATED 10/11/2006 AMOUNTING TO RS. 1,11,278/- FROM M/S. VIRAG JEWELS, PROP: MUDIT KARNAWAT WAS ISSUED TO HIM. THE PAYMENT OF THE BILL WAS MADE THROUGH CHEQUE. THIS BILL AS WELL AS BANK STATEMENT REFLEC TING THE PAYMENT HAS BEEN FOUND PLACED AT PAGED 3-4 OF THE PAPER BOOK. COPY OF THE LEDGER ACC OUNT IS ALSO FOUND AT PAGES5-7 OF THE ASSESSEES PAPER BOOK. I ALSO NOTE FROM PERUSAL OF BALANCE SHEET AS ON 31-03-2005, PAGE-2 OF THE PAPER BOOK JEWELLERY WORTH OF RS.1394682/- HAS BEEN REFLECTED. THE ASSESSEE IS ALSO A WEALTH TAX PAYEE AND VALUATION REPORT OF THE JEWELL ERY AND ORNAMENTS VALUED BY REGISTERED 4 I.T.A NO.2157/KOL/2019 A.Y 2007-08 ASHOK SARAF HUF VALUER, SHRI UMESH KUMAR SRIMAL, HAS BEEN PLACED B EFORE ME DT. 31-03-2014 (AT PAGE-2 OF THE PAPER BOOK), WHEREIN I NOTE THAT ITEM NO. 2, ON E PACKET LOOSE CUT & POLISHED DIAMONDS WT. 4.01 CTS, WORTH RS.1,40,350/- IS VALUED. THE BI LL DT. 10/11/2006 AT PAGE-3 OF THE PAPER BOOK, IT SHOWS THAT THE ASSESSEE HAD PURCHASED CUT & POLISHED DIAMONDS WEIGHING 4.01 CTS @ RS. 27,750/- PER CT, WHICH COMES TO RS. 1,11,278/ - AS ON 10-11-2006. FROM A PERUSAL OF THE AFORESAID DOCUMENTS EX FACIE SHOWS THAT ASSESSE E HAS PURCHASED THE DIAMOND IN QUESTION WHICH CANNOT BE CALLED BOGUS BECAUSE ITS PHYSICAL E XISTENCE IS PROVED BY THE VALUATION MADE BY THE REGISTERED VALUER DATED 31.03.2014 AND CORRO BORATIVE EVIDENCE HAS BEEN PLACED ON RECORD. IN THE AFORESAID SCENARIO, I ALSO NOTE THA T A SIMILAR CASE OF MONAJ BEGANI V/S. ACIT, IN ITA NOS. 932, 933 TO 935 & 936/KOL/2017 ORDER DT. 15-12-2017, WHEREIN THE AUTHOR OF THIS ORDER HAS AFTER IN DEPTH ANALYSIS OF THE EVIDE NCE/MATERIAL CLEARLY IN THAT CASE HELD VIDE PARA 14 OF THE SAID ORDER THE SEQUENCE OF EVENTS/MO DUS-OPERANDI THAT AFTER THE ORDER IS PLACED BY THE IMPORTER OF DIAMONDS, THE CONCERNS OF MR. RA JENDRA JAIN IN TURN PLACES ORDERS FOR DIAMONDS FROM FOREIGN EXPORTERS AND WHEN THE CONSIG NMENT OF DIAMONDS REACHED EITHER IN MUMBAI OR IN SURAT, THE ACTUAL DELIVERY OF THE CONS IGNMENT COMES FIRST TO SHRI RAJENDRA JAIN OFFICE AND COLLECT THE BOOKED CONSIGNMENT ON BEHAL F OF ACTUAL IMPORTER. THEREAFTER, IT IS DELIVERED TO THE ACTUAL IMPORTER/CUSTOMERS THROUGH ANGADIAS AND THE CHEQUE/RTGS PAYMENTS ARE MADE BY THE END CUSTOMERS DIRECTLY FROM THEIR B ANK ACCOUNT TO M/S. VIRAG JEWELS [SHRI RAJENDRA JAIN CONCERNS] AND THE TRIBUNAL WAS PLEASE D TO DELETE THE ADDITION MADE BY THE DEPARTMENT. IN THAT CASE, THE TRIBUNAL PASSED A DET AILED ORDER, WHEREIN STATEMENT OF ALL THE RELEVANT PERSONS WHICH WERE ON RECORD AND DISCUSSED BY THE LOWER AUTHORITIES TO MAKE THE ADDITION WERE ANALYSED IN DETAIL. MOREOVER, FROM A LOOK AT THE STATEMENT OF SHRI SURENDRA JAIN IN RESPECT TO Q. 14 HAS NOT BEEN APPRECIATED, SO IT IS REPRODUCED AS UNDER:- Q.1 4 DURING THE SURVEY ACTION UNDERTAKEN AT VARIO US OFFICE PREMISES OF YOURS , NOT A SINGLE PIECE OF DIAMOND HAS BEEN FOUND BY RE SPECTIVE SURVEY TEAMS THROUGH THERE IS SUBSTANTIAL TURNOVER SHOWN BY VAR IOUS CONCERNS CONTROLLED BY YOU. PLEASE STATE AS TO WHERE DO YOU KEEP YOUR STOC K IN TRADE. AN. SIR. IN THIS REGARD. I WANT TO ADMIT THAT WE A RE ENGAGED IN BUSINESS OF BILL SHOPPING THROUGH ALL THE CONCERNS DUE TO WHICH WE DON 'T HAVE ANY PHYSICAL STOCK OF DIAMOND WITH US AT ANY OF OUR PLACE AT AN Y POINT OF TIME. I WOULD LIKE TO FURTHER ADD THAT WE ARE MERELY LENDING NAMES OF OU R VARIOUS CONCERNS TO THE REAL IMPORTER OF DIAMONDS WHO TAKES THE ACTUAL DELI VERY OF DIAMONDS. 8. FROM A BARE PERUSAL OF THE AFORESAID QUESTION A ND THE ANSWER BY SHRI RAJENDRA JAIN, IT IS CLEAR THAT HIS CONCERNS DOES NOT KEEP ANY STOCK OF DIAMOND AT ANY POINT OF TIME AND 5 I.T.A NO.2157/KOL/2019 A.Y 2007-08 ASHOK SARAF HUF THAT THE REAL IMPORTER OF DIAMONDS TAKES ACTUAL DEL IVERY OF DIAMONDS. AND THE BILLING OF THE SAME (DIAMONDS) TAKES PLACE IN DIFFERENT NAME OF TH E RAJENDRA JAINS CONCERNS. THIS QUESTION AND ANSWER SHOWS THAT DIAMONDS ARE NOT KEPT AS PHY SICAL STOCK-IN-TRADE WITH RAJENDRA JAINS CONCERNS. HOWEVER, THE DIAMONDS IMPORTED BY SHRI JA INS CONCERNS ARE ACTUALLY DELIVERED TO THE ACTUAL IMPORTER OF DIAMONDS AND THE BILLING OF THE IMPORTED DIAMONDS ARE SHOWN IN THE NAME OF JAINS DIFFERENT CONCERNS. AFTER ANALYSING THE ENTIRE QUESTION AND ANSWERS OF THE RECORDED STATEMENTS IN DEPTH, I AM OF THE OPINION T HAT THE Q(QUESTION) & A (ANSWER) GIVEN BY SHRI RAJENDRA JAIN AND OTHERS HAS NOT BEEN PROPERLY APPRECIATED AND CONSIDERED BY THE AO IN THE ASSESSMENT ORDER. HOWEVER, SINCE I HAVE ANALYS ED ALL THE Q & A GIVEN BY SHRI RAJENDRA JAIN WHILE PASSING THE ORDER IN THE CASE OF MANOJ B EGANI (SUPRA), I FIND THAT NO ADDITION IS WARRANTED IN THIS CASE ALSO. MOREOVER, ADDITION INV OKING SECTION 69 OF THE ACT BY THE LD. CIT(A) CANNOT BE SUSTAINED IN THE EYES OF LAW BEC AUSE INVESTMENT OF JEWELLERY HAS BEEN DULY REFLECTED IN THE BOOKS OF ACCOUNT OF ASSESSEE AS WE LL AS THE SOURCE OF FUND IS UN-DISPUTEDLY FROM THE ASSESSEES DISCLOSED BANK ACCOUNT. THUS, I NOTE THAT SOURCE OF INVESTMENT HAS BEEN PROPERLY AND SATISFACTORILY EXPLAINED BY THE ASSESS EE. IN SUCH CIRCUMSTANCES, I AM OF THE VIEW THAT ADDITION MADE BY THE AO AND CONFIRMED BY THE L D. CIT(A) CANNOT BE SUSTAINED IN THE EYE OF LAW AND THE SAME IS DIRECTED TO BE DELETED. THIS GROUND OF ASSESSEE IS ALLOWED. 9. GROUND NO. 4 IS RELATING TO TDS CREDIT OF RS.9,5 40/-. ACCORDING TO THE ASSESSEE, THE TDS CREDIT AS PER LAW HAS NOT BEEN GRANTED TO THE A SSESSEE. FOR VERIFICATION OF THE SAME, WE REMAND THIS ISSUE BACK TO THE FILE OF THE AO AND T HE ASSESSEE IS DIRECTED TO PRODUCE NECESSARY DOCUMENTS/EVIDENCES TO SUBSTANTIATE THAT TDS CREDIT HAS NOT BEEN GIVEN TO THE ASSESSEE. IF THE AO FIND THAT THE CLAIM IS VALID , THEN TDS CREDIT N EEDS TO BE GRANTED TO THE ASSESSEE IN ACCORDANCE TO LAW. 10. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 2 0TH DECEMBER, 2019 SD/- A.T. VARKEY JUD ICIAL MEMBER DA TED 20 -12-2019 PP(SR.P.S.) 6 I.T.A NO.2157/KOL/2019 A.Y 2007-08 ASHOK SARAF HUF COPY OF THE ORDER FORWARDED TO: 1. APPELLANT/ASSESSEE: SRI ASHOK SARAF HUF C/O SUBHAS AGARWAL & ASSOCIATES, SIDDHA GIBSON, 1 GIBSON LANE, SUITE 213, 2 ND FL., KOLKATA-69. 2 RESPONDENT/REVENUE: THE I.T.O., WARD 34(4), AAYKAR BHAWAN, DAKSHIN, 2 GARIAHAT ROAD, KOLKATA-27. 3. CIT, 4. CIT(A), KOLKATA. 5. DR, KOLKATA BENCHES, KOLKATA **PP/SPS TRUE COPY BY BY ORDER ASSISTANT REGISTRAR ITAT KOLKATA