Star Gems & Jewellery, Delhi V. Pr.CIT- 16, New Delhi

ITA 4490/DEL/2019

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 0082 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-06-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: G
• Assessment Year: 2010-2011
• Appeal Filed On: 16-05-2019
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S S RANACIT
• Keywords: Bogus purchase; Search and seizure; Accommodation entries; Assessment record; Onus to prove; Borrowed satisfaction; Set aside
• Section: 69C; 143(3); 143(1); 192; 13; 68; 148; 6; 263; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH G NEW DLEHI BEFORE SHRI O.P.KANT, ACCOUNTANT MEMBER AND SHRI K. NARSIMHA CHARY, JUDICIAL MEMBER ITA NO. 4490/DEL/2019 ASSESSMENT YEAR: 2010-11 M/S STAR GEMS & JEWELRY VS PCIT -16, PROP: USHA GOEL ROOM NUMBER 101, 1167, KUCHA MAHAJANI DRUM SHAPE BUILDING, CHANDINI CHOWK, NEW DELHI. NEW DELHI PAN AAFPG4275L (APPELLANT) (RESPONDENT) APPELLANT BY: SMT. PREMLATA BANSAL, SR AD VOCATE SRI DIVYANSHU AGARWAL, ADVOCATE RESPONDENT BY: SH. S S RANA,CIT DR. DATE OF HEARING: 05/3/2020 DATE OF ORDER : 01/6/2020 ORDER PER K. NARSIMHA CHARY, J.M. THIS APPEAL IS FILED BY M/S STAR GEMS & JEWELRY ( THE ASSESSEE) CHALLENGING THE ORDER DATED 25/10/2018 P ASSED UNDER SECTION 263 OF THE INCOME TAX ACT, 1961 (THE ACT) BY THE LEARNED PRINCIPAL COMMISSIONER OF INCOME TAX ( LD. PCIT) FOR THE ASSESSMENT YEAR 2010-11. 2 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FI LED THE RETURN OF INCOME FOR THE ASSESSMENT YEAR 2010-11 ON 28/9/2010 DECLARING AN INCOME OF RS. 25,23,730/- A ND THE SAME WAS PROCESSED ON SECTION 143(1) OF THE ACT. T HERE WAS A SEARCH AND SEIZURE ACTION IN THE CASE OF MR RAJENDRA JAIN, SANJAY CHAUDHARY AND DHARMICHAND JAIN ON 3/10/2013 B Y THE DGIT (INV.), MUMBAI. LEARNED ASSESSING OFFICER S AYS THAT THE SAID PERSONS ARE ENTRY PROVIDERS OPERATING IN MUMBA I, INDULGING IN PROVIDING ACCOMMODATION ENTRIES IN THE NATURE OF BOGUS SALES AND UNSECURED LOANS. IN HIS STATEMENT RECORDED UNDER SECTION 132 (4) ON 5/10/2013 AND 5/12/2013, M R RAJENDRA JAIN ADMITTED TO HAVE BEEN ENGAGED IN THE BUSINESS OF BILLS SHOPPING TO ALL THE CONCERNS AND WERE MERELY LENDING NAMES OF THEIR VARIOUS CONCERNS TO THE REAL IMPORTE RS OF DIAMONDS WHO TAKES THE ACTUAL DELIVERY OF DIAMONDS. SUCH A STATEMENT OF RAJENDRA JAIN WAS CORROBORATED BY MR A NUP JAIN ALSO. 3. CONSEQUENTLY, NOTICE UNDER SECTION 148 OF THE AC T, WAS ISSUED. BY WAY OF LETTER DATED 6/12/2017 THE ASSESS EE STATED THAT THE RETURN FILED SHOWING THE INCOME OF RS. 30 ,81,760/- ON 6/12/2017 MAY BE TREATED AS THE RETURN IN RESPONSE TO THE NOTICE UNDER SECTION 148 OF THE ACT. NOTICES UNDER SECTION 143 (2) AND 142 (1) OF THE ACT WERE ISSUED. HAVING CON SIDERED THE 3 SUBMISSIONS MADE BY THE ASSESSEE, LEARNED ASSESSING OFFICER RECORDED THAT, THE ASSESSEE OFFERED TO TREAT THE TR ANSACTION WITH THE ABOVE PERSONS, IN TERMS OF THE DECISION OF THE INCOME TAX APPELLATE TRIBUNAL IN THE CASE OF VISHAL DIAMON DS DATED 24/9/2015. 4. ON EXAMINATION OF THE CASE OF THE ASSESSEE, LEAR NED ASSESSING OFFICER RECORDED THAT THE ASSESSEE FAILED TO FURNISH EVIDENCE ESTABLISHING RECEIPT OF GOODS PURPORTED TO HAVE BEEN PURCHASED FROM THE ABOVE PERSONS AND SINCE THE ASSE SSEE FAILED TO DISCHARGE THE ONUS TO PROVE THAT THE SUPP LIER ARE GENUINE PERSONS AND HAVE REALLY SUPPLIED THE MATERI AL TO THE ASSESSEE, MERELY BECAUSE THE PAYMENT WAS MADE TO TH E BANKING CHANNELS, TRANSACTION CANNOT BE BELIEVED AN D THE BILLS OBTAINED BY THE ASSESSEE ARE HELD TO BE THE PART OF THE TRANSACTION OF OBTAINING ACCOMMODATION ENTRIES. 5. THEREAFTER, THE LEARNED ASSESSING OFFICER RECORD ED THAT WHERE ON ONE HAND, THE GENUINENESS OF THE PURCHASE PARTIES IS DOUBTED, BUT THE GENUINENESS OF PURCHASES ON A WHOL E CANNOT BE DOUBTED, THE COURTS HAVE TAKEN THE VIEW THAT ONL Y THE PROFIT MARGIN EMBEDDED IN SUCH A TRANSACTION HAS TO BE TAX ED. ACCORDING TO THE LEARNED ASSESSING OFFICER, THE ASS ESSEE HAS INFLATED THE PURCHASE BY TAKING ACCOMMODATION ENTRY TO REDUCE 4 THE PROFIT ELEMENT AND IN SUCH SITUATION, THE LEARN ED ASSESSING OFFICER CONSIDERED THE QUESTION AS TO WHETHER THE E NTIRE AMOUNT OF PURCHASE SHOULD BE ADDED BACK TO THE INCO ME OF THE ASSESSEE, OR ONLY THE PROFIT ELEMENT EMBEDDED THERE IN. FOR THIS PURPOSE, THE LEARNED ASSESSING OFFICER CONSIDE RED THE QUESTION AS TO WHETHER THE PURCHASERS THEMSELVES WE RE COMPLETELY BOGUS AND A NON-EXISTENT, OR THAT THE PU RCHASERS WERE ACTUALLY MADE BUT NOT FROM THE PARTIES FROM WH OM THOSE WERE CLAIMED TO HAVE BEEN MADE AND INSTEAD MAY HAVE BEEN PURCHASED FROM GREY MARKET WITHOUT PROPER BILLING O R DOCUMENTATION. 6. BY PLACING RELIANCE ON THE DECISION OF THE HONB LE GUJARAT HIGH COURT IN THE CASE OF CIT VS. BHOLANATH PLY FAB P. LTD. (2013) 355 ITR 290 AND ALSO CIT VS. SIMIT P. SHETH LEARNED ASSESSING OFFICER REACHED A CONCLUSION THAT THE PROFIT EMBEDD ED IN THE PURCHASE TO THE TUNE OF RS. 69,75,369/- AT 14.35%, AS A AGAINST 8% OFFERED BY THE ASSESSEE, WHICH WORKS OUT TO RS. 10,00,966/- HAS TO BE ADDED TO THE INCOME OF THE ASSESSEE. 7. SUBSEQUENTLY, ON THE PROPOSAL FOR REVIEW OF THIS CASE FOR THE ASSESSMENT YEAR 2010-11 RECEIVED FROM THE LEARN ED ASSESSING OFFICER THROUGH THE JCIT, LEARNED PCIT PE RUSED THE ASSESSMENT ORDER AND ASSESSMENT RECORDS AND AFTER H EARING THE 5 ASSESSEE OBSERVED THAT THE QUESTION INVOLVED IN THI S MATTER IS WHETHER ONLY GP ADDITION IS TO BE MADE ON PURCHASES OR THE ENTIRE PURCHASES ARE TO BE DISALLOWED AND ADDED BAC K IN TERMS OF THE DECISION OF THE HONBLE GUJARAT HIGH COURT I N THE CASE OF NK PROTEINS LTD VS.DCIT, IN APPEAL NUMBER 240 OF 20 03 VIDE ORDER DATED 20/6/2016. ACCORDING TO THE LD. PCIT, THE LEARNED ASSESSING OFFICER MADE A PURE PRESUMPTION WITHOUT A NY EVIDENCE THAT THE PURCHASES WOULD HAVE BEEN ACTUALL Y MADE FROM GREY/CASH MARKET WITHOUT REALISING THE FACT TH AT IN THAT CASE ALSO, THE ENTIRE CASH INVESTMENT IN SUCH PURCH ASES REMAIN UNEXPLAINED AND THUS NEEDS TO BE ADDED FULLY UNDER SECTION 68 AND 69C OF THE ACT. 8. ACCORDING TO THE PCIT, IN THE ABSENCE OF ANY EVI DENCE TO SHOW THAT SUCH PURCHASES WERE ACTUALLY MADE FROM SO ME OTHER SOURCE, THE ENTIRE PURCHASES HAVE TO BE DISALLOWED. HE, THEREFORE, RECORDED THAT NOT CONSIDERING THE LATEST DECISION ON THE ASPECT IN THE CASE OF NK PROTEINS LTD(SUPRA) BY THE HONBLE GUJARAT HIGH COURT AND THE DISMISSAL OF SLP AGAINST THE JUDGEMENT BY THE ON HONBLE SUPREME COURT RENDERS T HE ASSESSMENT ORDER ERRONEOUS AND LEVYING ONLY 14.35% OF THE BOGUS PURCHASES INSTEAD OF DISALLOWING THE ENTIRE E XPENDITURE IN THAT RESPECT, MAKES IT PREJUDICIAL TO THE INTERES T OF REVENUE. HE, THEREFORE, SET ASIDE THE ASSESSMENT ORDER UNDER SECTION 6 263 OF THE ACT AND DIRECTED THE LEARNED ASSESSING O FFICER TO PASS ASSESSMENT ORDER DE NOVO BY CALLING RELEVANT D ETAILS, APPLYING THE RELEVANT LAW IN AN OBJECTIVE MANNER WI THOUT BEING INFLUENCED BY THE ORDER UNDER SECTION 263 OF THE AC T. 9. AGGRIEVED BY SUCH AN ORDER PASSED UNDER SECTION 263 OF THE ACT ASSESSEE PREFERRED THIS APPEAL. ARGUMENT OF THE LEARNED AR IS THAT THE ACTION TAKEN BY THE LD. PCIT IS NOT SUSTAINABLE IN LAW FOR THE REASON THAT SUCH AN ACTI ON WAS TAKEN BY THE LD. PCIT ON THE BORROWED SATISFACTION OF THE LD. JCIT; THAT THE LD. PCIT ERRED IN HOLDING THAT THE ASSESSM ENT ORDER PASSED BY THE LEARNED ASSESSING OFFICER WAS ERRONE OUS AS THE LD. ASSESSING OFFICER HAD FAILED TO FOLLOW THE LATE ST DECISION OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF NK PR OTEINS (SUPRA); THAT SUCH A DECISION OF THE HONBLE GUJARA T HIGH COURT IS NOT APPLICABLE TO THE FACTS OF THE CASE INASMUCH AS THE PURCHASES IN SUCH CASE WERE TREATED AS BOGUS PURCHA SES WHEREAS IN THE PRESENT CASE THE LEARNED ASSESSING O FFICER FOUND THAT IT IS A CASE OF ASSESSEE INFLATING THE P URCHASES ARE TAKING ACCOMMODATION ENTRY AND THEREFORE, THE LEARN ED ASSESSING OFFICER WAS RIGHT IN BRINGING TO TAX ONL Y THE PROFIT ELEMENT INVOLVED IN THE PURCHASES; THAT THE FACTS O F THIS CASE ARE SIMILAR TO THE CASE OF BHOLANATH PLY FAB PVT. L TD; THAT IN THIS CASE, THE SALES HAVE NOT BEEN DOUBTED BY THE LEARNE D ASSESSING 7 OFFICER AND, THEREFORE, WHERE THE BOOKS OF ACCOUNTS OF THE ASSESSEE ARE AUDITED AND DETAILS OF CLOSING STOCK W ERE DULY FURNISHED, ENTIRE PURCHASE COULD NOT HAVE BEEN DISA LLOWED BY THE ASSESSING OFFICER; THAT WHERE AFTER CONSIDERING THE MATERIAL, THE LEARNED ASSESSING OFFICER HAD COME TO A DEFINIT E CONCLUSION, THE MERE FACT THAT A DIFFERENT VIEW COULD BE TAKEN SHOULD NOT BE A BASIS FOR AN ACTION UNDER SECTION 263 OF THE A CT; AND THAT THE JURISDICTION UNDER SECTION 263 CANNOT BE ASSUME D IN RESPECT OF A DEBATABLE ISSUE AND IN VIEW OF THE DEC ISION OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. VISIBL E PRODUCTS LTD (1973) 88 ITR 192 (SC) WHERE THERE IS POSSIBLY OF TWO DIFFERENT OR CONFLICTING VIEWS, THE VIEW IN FAVOUR OF THE ASSESSEE SHOULD BE PREFERRED. LASTLY LD. AR BROUGHT TO OUR NOTICE THE CBD INSTRUCTION NO. 2 OF 2008 DATED 22/2/2008, PRE SCRIBING THE ASSESSMENT PROCEDURE FOR THE ASSESSEES ENGAGED IN T HE DIAMOND MANUFACTURING AND/OR TRADING, WHEREIN IT IS STATED THAT IF AN ASSESSEE HAS SHOWN A SUM EQUAL TO HIGHER THAN 6% OF THE TOTAL TURNOVER FROM SUCH BUSINESS AS HIS INCOME UNDER THE HEAD PROFIT AND GAINS OF BUSINESS OR PROFESSION F OR A PARTICULAR ASSESSMENT YEAR, THE LEARNED ASSESSING O FFICER SHALL ACCEPT THE TRADING RESULT. 10. PER CONTRA, LD. DR PLACED RELIANCE ON THE EXPLA NATION THAT HAS BEEN INSERTED IN SECTION 263 OF THE ACT BY FINA NCE ACT, 2015 8 WITH EFFECT FROM 1/6/2015 AND ALSO THE DECISIONS OF THE HONBLE SUPREME COURT IN THE CASE OF DANIEL MERCHANT PRIVAT E LIMITED VS.ITO DATED 29/11/2017, RAJ MONDIR PRIVATE LIMITED VS.PCIT (2017) TAXMAN.COM 285 (SC), MANJUNATHESWARA PACKING PRODUCTS AND CAMPHOR WORKS VS.CIT (1998) TO 31 ITR 53 (SC) AND OTHER HIGH COURT IN SUPPORT OF HIS CONTENTION T HAT WHERE THE LEARNED ASSESSING OFFICER DID NOT MAKE ANY PROP ER ENQUIRY WHILE MAKING THE ASSESSMENT AND ACCEPTED THE EXPLAN ATION OF THE ASSESSEE, THE DIRECTION GIVEN TO THE LEARNED AS SESSING OFFICER UNDER SECTION 263 OF THE ACT TO CARRY OUT T HE DETAILED ENQUIRY IS SUSTAINABLE. 11. HE ALSO PLACED RELIANCE ON THE DECISION OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF NK PROTEINS LTD ( SUPRA) AND SUBMITTED THAT WHEN THE ENTIRE TRANSACTION WAS FOUN D TO BE BOGUS AND WHERE THE PURCHASES MADE BY THE ASSESSEE WERE TREATED AS BOGUS BY THE LEARNED ASSESSING OFFICER, THE ADDITION ON THE BASIS OF UNDISCLOSED INCOME CANNOT BE RESTRI CTED TO CERTAIN PERCENTAGE. HE SUBMITTED THAT THOUGH THE L EARNED ASSESSING OFFICER POSED A QUESTION TO HIMSELF AS TO WHETHER THE ENTIRE AMOUNT OF PURCHASES SHOULD BE ADDED BACK TO THE INCOME OF THE ASSESSEE OR ONLY THE PROFIT ELEMENT E MBEDDED THEREIN WAS TO BE ADDED, AND ALSO POSED THE QUESTIO N AS TO WHETHER THE PURCHASES THEMSELVES WERE COMPLETELY BO GUS AND 9 NON-EXISTENT OR THAT THE PURCHASES WERE ACTUALLY MA DE NOT FROM THE PARTIES FROM WHOM IT WAS CLAIMED TO HAVE B EEN MADE AND INSTEAD MIGHT HAVE BEEN PURCHASED FROM GREY MAR KET WITHOUT PROPER BILLING OR DOCUMENTATION - LEARNED A SSESSING OFFICER DID NOT DISCUSS THE ISSUE WITH REFERENCE TO THE BOOKS OF ACCOUNTS OF THE ASSESSEE TO REACH A CONCLUSION THAT THE ASSESSEE HAS INFLATED THE PURCHASES BY TAKING ACCOM MODATION ENTRY TO REDUCE THE PROFIT ELEMENT OR THAT THE ENTI RE PURCHASES WERE NOT BOGUS. 12. ACCORDING TO THE LD. DR THOUGH THE ASSESSEE CLA IMS THAT THE LEARNED ASSESSING OFFICER HAD CONSIDERED SUCH A N ASPECT IN THE LIGHT OF THE AUDITED BOOKS OF ACCOUNTS OF THE A SSESSEE AND THE DETAILS OF CLOSING STOCK ET CETERA AND IT WAS O NLY THEREAFTER THE LEARNED ASSESSING OFFICER ACCEPTED THE SALES, S UCH THE FACT IS NOT REFLECTED IN THE ASSESSMENT ORDER AND THE LE ARNED PCIT, THEREFORE, JUSTIFIED IN SETTING ASIDE THE ASSESSMENT ORDER WHICH IS NONSPEAKING ON THIS ASPECT AND DIRECTING THE LEA RNED ASSESSING OFFICER TO PASS THE ASSESSMENT ORDER DE N OVO BY CALLING RELEVANT DETAILS, APPLYING THE RELEVANT LAW IN AN OBJECTIVE MANNER WITHOUT BEING INFLUENCED BY THE DI SCUSSION HELD IN THE ORDER PASSED ON SECTION 263 OF THE ACT AFTER PROVIDING AN OPPORTUNITY TO THE ASSESSEE OF BEING H EARD. 10 13. WE HAVE PERUSED THE RECORD IN THE LIGHT OF THE SUBMISSIONS MADE ON EITHER SIDE. THE IMPUGNED ORDE R READS THAT ON RECEIVING A PROPOSAL FOR REVIEW OF THE CASE OF THE ASSESSEE FOR THE ASSESSMENT YEAR 2010-11 THROUGH TH E JCIT, LD. PCIT PERUSED THE ASSESSMENT ORDER AND ASSESSMENT RE CORDS AND FOUND THAT THE ASSESSMENT ORDER DATED 21/12/201 7, PASSED BY THE LEARNED ASSESSING OFFICER UNDER SECTION 147/ 143(3) OF THE ACT WAS ERRONEOUS INSOFAR AS PREJUDICIAL TO THE INTEREST OF THE REVENUE. THE IMPUGNED ORDER DOES NOT SHOW THAT THE REVIEW OF THE ASSESSMENT ORDER DATED, 21/12/2017 BY THE JCIT IS THE SOLE BASIS FOR EXERCISE OF JURISDICTION UNDER SECTION 263 OF THE ACT BY THE LD. PCIT. FORWARD OF THE CASE BY TH E JCIT IS ONLY TRIGGERED THE PROCESS OF THE LD. PCIT PERUSING THE ASSESSMENT ORDER AND ASSESSMENT RECORDS TO REACH A CONCLUSION THAT THE ORDER PASSED UNDER SECTION 147/143(3) OF THE ACT WA S ERRONEOUS, INSOFAR AS IT IS PREJUDICIAL TO THE INTER EST OF THE REVENUE. IT IS, THEREFORE, CLEAR THAT THE LEARNED PCIT REACHED AN INDEPENDENT CONCLUSION AS TO THE NATURE OF THE ASSE SSMENT ORDER AFTER PERUSAL OF THE ASSESSMENT ORDER AND ASS ESSMENT RECORD, AND CONSEQUENTLY CANNOT IT BE SAID THAT THE ACTION WAS TAKEN BY THE LEARNED PCIT WAS ON THE BORROWED SATIS FACTION. WE THEREFORE REJECT THE FIRST CONTENTION OF THE LD. AR. 11 14. NOW ADVERTING TO THE NEXT CONTENTION OF THE ASS ESSEE THAT DURING THE ORIGINAL ASSESSMENT PROCEEDINGS SH E HAD PRODUCED THE RELEVANT MATERIAL, INCLUDING CONFIRMAT ION FROM THE SUPPLIERS ALONG WITH THE BANK STATEMENT AND HAD ALSO OFFERED EXPLANATION; WHEREAS IN THE CASE OF NK PROT EINS SEARCH WAS CONDUCTED AT THE PREMISES OF THE COMPANY DURING WHICH VARIOUS INCRIMINATING MATERIAL WAS FOUND AND SEIZED HIS CONCERNED, THE QUESTION WHETHER THE SEARCHES CONDUC TED IN THE PREMISES OF THE ASSESSEE OR THAT DURING SUCH SE ARCH, ANY INCRIMINATING MATERIAL RELATING TO OUR PERTAINING T O THE ASSESSEE WERE FOUND IS IRRELEVANT. IT IS ONLY BECAUSE THE S TATEMENT GIVEN BY MR RAJENDRA JAIN CORROBORATED BY MR ANUP JAIN, LE ARNED ASSESSING OFFICER HAD TO VERIFY THE GENUINENESS OF THE PURCHASES MADE BY THE ASSESSEE. LEARNED ASSESSING OFFICER AFTER ISSUING REQUISITE NOTICES UNDER LAW, AND AFTE R HEARING THE ASSESSEE PROCEEDED TO ASSESS THE INCOME OF THE ASSE SSEE. IT IS PERTINENT TO NOTE THAT DURING THE ASSESSMENT PROCEE DINGS, THE ASSESSEE OFFERED TO TAX 8% OF THE DISPUTED PURCHASE S STATING THAT IT WAS SO TO PURCHASE PEACE AND IN TERMS OF TH E DECISION OF THE INCOME TAX APPELLATE TRIBUNAL IN VISHAL DIAMOND S CASE. 15. NOW THE LIMITED QUESTION FOR OUR CONSIDERATION IS WHETHER THE LEARNED PCIT IS JUSTIFIED IN SETTING ASI DE THE ASSESSMENT ORDER AND DIRECTING THE LEARNED ASSESSIN G OFFICER TO 12 PASS THE ASSESSMENT ORDER DE NOVO BY CALLING RELEVA NT DETAILS, APPLYING THE RELEVANT LAW IN AN OBJECTIVE MANNER WI THOUT BEING INFLUENCED BY THE DISCUSSION MADE BY HIM IN THE ORD ER PASSED UNDER SECTION 263 OF THE ACT. INSOFAR AS THE CONTE NTION OF THE LEARNED PCIT THAT THE LEARNED ASSESSING OFFICER FAI LED TO CONSIDER THE DECISION OF THE HONBLE GUJARAT HIGH C OURT IN THE CASE OF NK PROTEINS IS CONCERNED, THE ASSESSMENT OR DER IS CONSPICUOUS ON THIS ASPECT. THOUGH THE LEARNED ASS ESSING OFFICER REFERRED TO THE DECISIONS OF THE HONBLE GU JARAT HIGH COURT IN THE CASES OF BHOLANATH PLY FAB. LTD, SIMI T P. SEITH ET CETERA THERE IS NO REFERENCE TO THE CASE OF NK PROT EINS (SUPRA). 16. IT IS NO DOUBT TRUE THAT THE LEARNED ASSESSING OFFICER RAISED THE QUESTION AS TO WHETHER THE ENTIRE AMOUNT OF PURCHASES SHOULD BE ADDED BACK TO THE INCOME OF THE ASSESSEE OR ONLY THE PROFIT ELEMENT EMBEDDED IN SUCH PURCHAS ES WAS TO BE ADDED AND FOR SUCH PURPOSE THOUGHT IT FIT TO CON SIDER THE QUESTION WHETHER THE PURCHASES THEMSELVES WERE COMP LETELY BOGUS AND NON-EXISTENT OR THAT THE PURCHASES WERE A CTUALLY MADE BUT NOT FROM THE PARTIES FROM WHOM IT WAS A CL AIM TO HAVE BEEN MADE AND INSTEAD MAY HAVE BEEN PURCHASED FROM THE GREY MARKET WITHOUT PROPER BILLING OR DOCUMENTA TION. HAVING POSED SUCH A QUESTION, THE LEARNED ASSESSING OFFICER FAILED TO REFER TO THE BOOKS OF ACCOUNTS OF THE ASS ESSEE TO SAY 13 THAT THE ENTIRE TRANSACTION OF PURCHASES WAS NOT BO GUS, BUT THE ASSESSEE ACTUALLY MADE PURCHASES, THOUGH NOT FROM T HE PARTIES FROM WHOM SUCH PURCHASES WERE CLAIMED TO HAVE BEEN MADE, BUT PURCHASED FROM GREY MARKET WITHOUT PROPER BILLI NG OR DOCUMENTATION SO THAT ONLY THE PROFIT ELEMENT INVOL VED IN SUCH PURCHASE TRANSACTION HAS TO BE BROUGHT TO TAX. WIT HOUT MAKING ANY FURTHER ENQUIRY, AS COULD BE ESTABLISHED FROM T HE RECORD, LEARNED ASSESSING OFFICER, EVEN BEFORE POSING SUCH A QUESTION AS TO THE QUANTUM OF THE ADDITION, RECORDED THAT TH E ASSESSEE HAS INFLATED THE PURCHASES BY TAKING ACCOMMODATION ENTRY TO REDUCE THE PROFIT ELEMENT. 17. AS A MATTER OF FACT, WHEN THE LEARNED ASSESSING OFFICER REACHED A CONCLUSION THAT THE ASSESSEE TOOK ACCOMMO DATION ENTRIES IN RESPECT OF PURCHASES, IT IS INCUMBENT UP ON THE LEARNED ASSESSING OFFICER TO REFER TO THE AUDITED A CCOUNTS OF THE ASSESSEE AND ALSO THE CLOSING STOCK REGISTER TO SAY THAT THE ENTIRE TRANSACTION IS NOT A BOGUS ONE, BUT ONLY THE BILLS WORK PURCHASED FROM GREY MARKET, WHEREAS THE PURCHASE WA S A GENUINE ONE. IT IS ONLY WHEN THE LEARNED ASSESSING OFFICER RECORDS THE FACT WITH REFERENCE TO THE ACCOUNTS OF THE ASSESSEE THAT IN FACT THE PURCHASES TOOK PLACE CORRESPONDING TO THE SALES AND ONLY THE BILLS WERE THE RESULT OF OBTAINING THE ACCOMMODATION ENTRIES, IT COULD BE SAID THAT THE LD . ASSESSING 14 OFFICER TOOK A PLAUSIBLE VIEW. THE ASSESSMENT ORDER DOES NOT SHOW THAT IT IS ONLY AFTER EXAMINING THE AUDITED AC COUNTS OF THE ASSESSEE, THE LEARNED ASSESSING OFFICER SATISFIED T HAT IN VIEW OF THE SALES RECORDED IN THE BOOKS, THE PURCHASES CANN OT BE DOUBTED, BUT IN THE ABSENCE OF ANY PROOF THAT THE G OODS WERE PURCHASED FROM THE PARTIES FROM, WHOM THOSE OF CLAI MED TO HAVE BEEN PURCHASED, IT HAD TO BE INFERRED THAT HAV E BEEN PURCHASED THE GOODS FROM GREY MARKET, THE ASSESSEE OBTAINED THE PURCHASE BILLS BY WAY OF ACCOMMODATION ENTRIES SO AS TO INFLATE THE PURCHASE PRICE. 18. FURTHER, LEARNED PCIT IN HIS ORDER OBSERVED THA T THE ASSESSEE WAS REQUIRED TO PROVE THAT SUCH PURCHASES WERE ACTUALLY MADE FROM SOME OTHER SOURCE, BUT ASSESSEE FAILED TO DISCHARGE SUCH ONUS; THAT IN CASE OF CASH PURCHASES , THE ASSESSEE WAS REQUIRED TO FURTHER PROVE SOURCE OF SU CH CASH PURPORTEDLY USED TO MAKE SUCH CASH PURCHASES AND IF IT WAS UNEXPLAINED, ENTIRE AMOUNT WAS REQUIRED TO BE ADDED ; AND THAT IN THE PRESENT CASE, THE ASSESSEE HAS PAID ONLY RS. 14 LAKHS DURING THE YEAR AND BALANCE AMOUNT OF RS. 55,75,36 9/- WAS OUTSTANDING AND, THEREFORE, IT CANNOT BE SAID THAT CASH OF RS. 69,75,369/- CAME OUT OF SUCH PURCHASE, PAYMENT AGAI NST WHICH WAS ONLY RS. 14 LAKHS. LEARNED PCIT, THEREFORE, O N EXAMINATION OF THESE FACTS AND ON THE BASIS OF TEST BASED ONUS, REACHED THE 15 CONCLUSION THAT THE ASSESSEE FAILED TO MAKE A CASE FOR ADDITION OF ONLY CERTAIN PERCENTAGE OF BOGUS PURCHASES AND I NSTEAD THE AMOUNT COVERED BY THE ENTIRE BOGUS PURCHASES HAD TO BE ADDED. 19. IT IS, THEREFORE, THE CLEAR OBSERVATION OF THE LEARNED PCIT THAT OUT OF THE TOTAL PURCHASES OF RS. 69,75,369/- , THE ASSESSEE PAID ONLY RS. 14 LAKHS DURING THE YEAR AND BALANCE AMOUNT OF RS. 55,75,369/- WAS OUTSTANDING AND THEREFORE IT W OULD BE DIFFICULT TO BELIEVE THAT BY PAYING CASH THE ASSESS EE PURCHASED THE GOODS AND OBTAINED THE PURCHASE BILLS BY WAY OF ACCOMMODATION ENTRIES. NO EXPLANATION IS FORTHCOMI NG FROM THE ASSESSEE ON THIS VITAL ASPECT. IT CANNOT, THER EFORE, BE SAID THAT THERE IS PROPER ENQUIRY ON THE PART OF THE LEA RNED ASSESSING OFFICER TO CONCLUDE THAT THE ASSESSEE IN FACT MADE PURCHASES, BUT NOT FROM THOSE PERSONS FROM WHOM SHE SAID TO HAVE PURCHASED, BUT FROM SOMEONE ELSE AT OBTAINED T HE PURCHASE BILLS BY WAY OF ACCOMMODATION ENTRIES ONLY TO INFLATE THE PURCHASES BY WAY OF SUCH ACCOMMODATION ENTRIES, AND THEREFORE, ONLY THE PROFIT ELEMENT INVOLVED IN SUCH PROCESS HAS TO BE BROUGHT TO TAX. FOR THESE REASONS, WE ARE UN ABLE TO ACCEPT THAT HAVING CONSIDERED THE AUDITED ACCOUNTS OF THE ASSESSEE THE LEARNED ASSESSING OFFICER RETURNED ANY FINDING AS TO THE ACCEPTABILITY OF THE PURCHASES OR THE GENUIN ENESS OF THE 16 PURCHASE AS A WHOLE AND IN THE ABSENCE OF ANY REASO NS RECORDED BY THE LD. ASSESSING OFFICER, IT IS DIFFIC ULT FOR US TO BELIEVE THAT THE PURCHASES ARE GENUINE, BUT ONLY TH E PURCHASE BILLS WERE OBTAINED BY WAY OF ACCOMMODATION ENTRIES , SO THAT NOT THE ENTIRE AMOUNT COVERED BY THE PURCHASES, BUT ONLY THE ELEMENT OF PROFIT INVOLVED THEREIN, IS LIABLE TO BE TAXED. 20. LEARNED PCIT RECORDED THAT IT IS NOT A CASE OF TWO POSSIBLE VIEWS AS IT WAS ADMITTED BY BOTH THE LEARNED ASSESS ING OFFICER AND THE ASSESSEE THAT THE PURCHASES WERE BOGUS, AS THE PARTIES FROM WHOM THE BILLS WERE TAKEN, WERE ACCOMMODATION ENTRY PROVIDERS AND IN SUCH CASE, IN THE ABSENCE OF ANY P ROOF THAT THE PURCHASES WERE ACTUALLY MADE FROM SOME OTHER SOURCE , BUT THE ASSESSEE OBTAIN THE BILLS FROM SOMEONE ELSE, THE EN TIRE PURCHASE TRANSACTION IS BOGUS AND THEREFORE THE DEC ISION OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF NK PROTEI NS (SUPRA) IS APPLICABLE TO THE FACTS OF THE CASE. ACCORDING TO HIM, NON- CONSIDERATION OF THE SAID JUDGEMENT AND NOT DISALLO WING THE ENTIRE PURCHASE AMOUNT RENDERS THE ASSESSMENT ORDER AS ERRONEOUS INSOFAR AS IT IS PREJUDICIAL TO THE INTERE ST OF REVENUE. 21. IN THE PRECEDING PARAGRAPHS WE EXPRESSED OUR OP INION THAT THE ASSESSMENT ORDER DOES NOT INDICATE THAT TH E LEARNED ASSESSING OFFICER HAD EXAMINED THE GENUINENESS OF T HE 17 PURCHASE TRANSACTION IN THE LIGHT OF THE AUDITED AC COUNTS OF THE ASSESSEE. MORE PARTICULARLY THE FACT THAT OUT OF TH E ALLEGED PURCHASERS OF RS. 69,75,369/- , THERE WAS PAYMENT TO THE SUPPLIERS ONLY TO THE EXTENT OF RS. 14 LAKHS AND T HE BALANCE AMOUNT OF RUPEES. 55,75,369/- WAS SHOWN TO HAVE B EEN OUTSTANDING GOES UNVERIFIED AND THE ASSESSMENT ORDE R IS SILENT ON THIS ASPECT. MENTION OF THIS FACT IN THE ORDER PASSED UNDER SECTION 263 OF THE ACT CLEARLY SHOWS THAT THE LEARN ED PCIT HAD EXAMINED THE RECORD AND REACHED A REASONABLE CONCLU SION THAT THIS NON-EXAMINATION OF THE GENUINENESS OF THE PURC HASES TO APPLY THE LAW LAID DOWN BY THE HONBLE GUJARAT HIGH COURT IN THE CASE OF NK PROTEINS (SUPRA) RENDERS THE IMPUGNE D ASSESSMENT ORDER AS ERRONEOUS INSOFAR AS IT IS PREJU DICIAL TO THE INTEREST OF REVENUE. IT CANNOT, THEREFORE, BE SAID THAT THE LEARNED PCIT DID NOT CONDUCT ANY INDEPENDENT ENQUIR Y TO REACH A CONCLUSION THAT THE ASSESSMENT ORDER IS ALSO PREJ UDICIAL TO THE INTEREST OF THE REVENUE. LEARNED PCIT IS RIGHT IN HIS OBSERVATION THAT THE EXAMINATION OF THE GENUINENESS OF THE PURC HASES IS NECESSARY IN THIS CASE. 22. FOR ALL THESE REASONS, WERE OF THE CONSIDERED O PINION THAT THE LEARNED PCIT RIGHTLY ASSUMED JURISDICTION AND IT IS ONLY AFTER PERUSAL OF THE ASSESSMENT ORDER AND ASSESSMENT RECO RD, HE REJECTED THE CONTENTIONS OF THE ASSESSEE THAT THE V IEW TAKEN BY 18 THE LEARNED ASSESSING OFFICER IS ALSO ONE OF THE PL AUSIBLE VIEWS. DECISIONS RELIED UPON BY THE ASSESSEE HAVE NO APPLI CATION TO THE FACTS OF THE CASE. 23. NOW COMING TO THE INSTRUCTION BEARING NUMBER 2 OF 2008 DATED 22/2/2008, IT IS SUBMITTED BY THE ASSESSEE TH AT THIS INSTRUCTION PRESCRIBES THE PROCEDURE FOR ASSESSMENT IN THE CASE OF THE PERSONS ENGAGED IN THE DIAMOND MANUFACTURING AND/OR TRADING, AND THIS INSTRUCTION SAYS THAT IF SUCH AN ASSESSEE HAD SHOWN A SUM EQUAL TO OR HIGHER THAN 6% OF HIS TOTAL TURNOVER FROM SUCH BUSINESS, AS IS INCOME UNDER THE HEADER PROFIT AND GAINS OF BUSINESS OR PROFESSION FOR A PARTICULAR A SSESSMENT YEAR, THE LEARNED ASSESSING OFFICER SHALL ACCEPT HI S TRADING RESULT. ASSESSEE IS FREE TO RISE SUCH A CONTENTION BEFORE THE LEARNED ASSESSING OFFICER AT THE TIME OF HEARING. 24. IN THE CIRCUMSTANCES, WHILE DECLINING TO QUASH THE IMPUGNED ORDER SECTION 263 OF THE ACT, WE DIRECT T HE LEARNED ASSESSING OFFICER TO EXAMINE THE BOOKS OF ACCOUNTS OF THE ASSESSEE IN THE LIGHT OF THE OBSERVATIONS MADE BY T HE LEARNED PCIT, AND ALSO TO CONSIDER THE CBDT INSTRUCTION BEA RING NUMBER 2 OF 2008 DATED 22/2/2008 AND TO TAKE A PLAUSIBLE V IEW TO PASS THE FRESH ASSESSMENT ORDER. 25. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D IN PART. 19 PRONOUNCED IN OPEN COURT ON THIS THE 1 ST OF JUNE, 2020. SD/- SD/- (O.P.KANT) (K. NARSIMHA CHARY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 01/6/2020 COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI DRAFT DICTATED DRAFT PLACED BEFORE AUTHOR APPROVED DRAFT COMES TO THE SR.PS/PS ORDER SIGNED AND PRONOUNCED ON FILE SENT TO THE BENCH CLERK DATE ON WHICH FILE GOES TO THE AR DATE ON WHICH FILE GOES TO THE HEAD CLERK. DATE OF DISPATCH OF ORDER. DATE OF UPLOADING ON THE WEBSITE