SUNJYOT GEMS, MUMBAI V. DCIT CEN CIR 22, MUMBAI

ITA 4828/MUM/2010

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 3088 (ITAT-MUMBAI)
• Duration Of Justice: 5 year(s) 3 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-09-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: E
• Next Hearing Date: 08-09-2014
• Assessment Year: 2003-2004
• Appeal Filed On: 10-06-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MANJUNATHA R SWAMY
• Keywords: Unexplained investment; Document seized; Onus to prove; Documents seized
• Section: 133A; 153A; 234B; 131; 69; 132

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI BEFORE SHRI N.K . BILLAIYA, ACCOUNTANT MEMBER AND RAM L AL NEGI, JUDICIAL MEMBER / I .T.A. NO. 4828/MUM/2010 ( / ASSESSMENT YEAR : 2003 - 04 M/S. SUNJYOT GEMS, 908 - A PANCHRATNA OPERA HOUSE, MUMBAI - 400 004 / VS. THE DCIT, CENTRAL CIRCLE - 22, AAYAKAR BHAVAN, MUMBAI / I .T.A. NO. 4803/MUM/2010 ( / ASSESSMENT YEAR : 2003 - 04 THE DCIT, CENTRAL CIRCLE - 22, AAYAKAR BHAVAN, MUMBAI / VS. M/S. SUNJYOT GEMS, 908 - A PANCHRATNA OPERA HOUSE, MUMBAI - 400 004 / I .T.A. NO. 4829/MUM/2010 ( / ASSESSMENT YEAR : 2004 - 05 M/S. SUNJYOT GEMS, 908 - A PANCHRATNA OPERA HOUSE, MUMBAI - 400 004 / VS. THE DCIT, CENTRAL CIRCLE - 22, AAYAKAR BHAVAN, MUMBAI / I .T.A. NO. 4844/MUM/2010 ( / ASSESSMENT YEAR : 2004 - 05 THE DCIT, CENTRAL CIRCLE - 22, AAYAKAR BHAVAN, MUMBAI / VS. M/S. SUNJYOT GEMS, 908 - A PANCHRATNA OPERA HOUSE, MUMBAI - 400 004 / I .T.A. NO. 5550/MUM/2010 ( / ASSESSMENT YEAR : 2005 - 06 M/S. SUNJYOT GEMS, 908 - A PANCHRATNA OPERA HOUSE, MUMBAI - 400 004 / VS. THE DCIT, CENTRAL CIRCLE - 22, AAYAKAR BHAVAN, M/S. SUNJYOT GEMS 2 MUMBAI / I .T.A. NO. 6030/MUM/2010 ( / ASSESSMENT YEAR : 2005 - 06 M/S. SUNJYOT GEMS, 908 - A PANCHRATNA OPERA HOUSE, MUMBAI - 400 004 / VS. THE DCIT, CENTRAL CIRCLE - 22, AAYAKAR BHAVAN, MUMBAI ./ ./ PAN/GIR NO. : AAKFS 9404Q ( / APPELLANT ) .. ( / RESPONDENT ) / A SSESSEE BY: SHRI MADHUR AGARWAL / REVENUE BY: SHRI MANJUNATHA R. SWAMY / DATE OF HEARING : 08 .0 9 .2015 / DATE OF PRONOUNCEMENT : 30 .0 9 .2015 / O R D E R PER N.K. BILLAIYA, AM: TH ESE APPEAL S BY THE ASSESSEE AND THE CROSS APPEALS BY THE REVENUE ARE PREFERRED AGAINST THE ORDER OF THE LD. CIT(A) - 39 , MUMBAI PERTAINING TO ASSESSMENT YEAR S 200 3 - 0 4 TO 2005 - 06 . THESE BUNCH OF APPEALS WERE HEARD TOGETHER AS COMMON ISSUES ARE INVOLVED AND ARE DISPOSED OF BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENC E AND BREVITY. 2. AT THE VERY OUTSET, REPRESENTATIVES FROM BOTH THE SIDES AGREED THAT THE FACTS IN ISSUES ARE IDENTICAL IN THE IMPUGNED ASSESSMENT YEARS IN SO FAR AS COMMON GRIEVANCE IS CONCERNED THEREFORE, FACTS OF A.Y. 2003 - 04 MAY BE TAKEN FOR CONSIDER ATION FOR THE DISPOSAL OF THE IMPUGNED APPEALS. M/S. SUNJYOT GEMS 3 ITA NO. 4828/M/2010 - A.Y. 2003 - 04 ASSESSEES APPEAL 3. THE FIRST GRIEVANCE OF THE ASSESSEE RELATES TO THE CLAIM THAT THE LD. CIT(A) OUGHT TO HAVE STRUCK DOWN THE ASSESSMENT ORDER SINCE THERE IS NO PRESC RIBED FORM FOR FURNISHING THE RETURN U/S. 153A OF THE ACT. 4. THE LD. COUNSEL FOR THE ASSESSEE DID NOT SERIOUSLY CONTEST THIS GROUND OF APPEAL AND THE SAME IS DISMISSED ACCORDINGLY. 5. THE LD. COUNSEL FOR THE ASSESSEE DID NOT PRESS GROUND NO. 2, THEREFORE IT IS DISMISSED AS NOT PRESSED. 6. GROUND NO. 3 RELATES TO UPHOLDING THE ADDITION MADE U/S. 69 OF THE ACT. 6.1. RIVAL SUBMISSIONS HAVE BEEN HEARD AT LENGTH IN THE LIGHT OF THE RELE VANT DOCUMENTARY EVIDENCES. WE HAVE CAREFULLY PERUSED THE ORDER S OF THE AUTHORITIES BELOW. THE FACT OF THE CASE ARE THAT THE ASSESSEE IS A PARTNERSHIP FIRM ENGAGED IN THE EXPORT OF DIAMOND AND IS ALSO ACTING AS A COMMISSION AGENT IN DIAMONDS. A SURVEY A CTION WAS CONDUCTED ON 1.10.2004 U/S. 133A OF THE ACT WHICH WAS LATER CONVERTED INTO A SEARCH ACTION U/S. 132 OF THE ACT ON 2.10.2004. DURING THE COURSE OF THE SEARCH ACTION, SEVERAL INCRIMINATING DOCUMENTS WERE FOUND AND SEIZED VIDE ANNEXURES A - 1 TO A - 4 OF PANCHANAMA DATED 2.10.2004. THE ASSESSEE WAS ASKED TO FILE RETURN OF INCOME BY ISSUING NOTICE U/S. 153A OF THE ACT, IN RESPONSE TO WHICH THE ASSESSEE FILED ITS RETURN OF INCOME DECLARING INCOME OF RS. 2,31,980/ - . M/S. SUNJYOT GEMS 4 6.2. WHILE SCRUTINIZING THE RETURN OF INCOME VIS - - VIS THE DOCUMENTS SEIZED DURING THE SEARCH PROCEEDINGS, ATTENTION OF THE ASSESSEE WAS DRAWN TO PAGE NO. 23 TO 32 OF ANNEXURE - A - 1 WHICH IS EXHIBITED AT PARA - 3 ON PAGES 2,3 & 4 OF THE ASSESSMENT ORDER. THE AOS OBSERVATION IN RESPECT OF THE EX HIBIT RELATES TO THE QUANTITY OF DIAMOND RECEIVED FROM SHRI NARENDRA SANGHVI BEING 3574.35 CTS WHICH PERTAIN TO FINANCIAL YEARS 2002 - 03 AND 2003 - 04. 6.3. STATEMENT OF SHRI ASHOK GULECHHA WAS RECORDED ON 8.12.2004 WHEREIN SPECIFIC QUESTIONS WERE ASKED ABOUT THE ENTRIES APPEAR ING ON THESE PAGES. THE RELEVANT PORTION OF THE STATEMENT OF SHRI ASHOK GULECHHA IS AT PAGES 4,5 & 6 OF THE ASSESSMENT ORDER. 6.4. COMPARING THE STATEMENT RECORDED ON 8.12.2004 WITH THE STATEMENT RECORDED ON 2.10.2004, THE AO OP INED THAT ON 2.10.2004, SHRI ASHOK GULECHHA HAS STATED THAT THE DIAMONDS WERE RECEIVED FROM THE SUPPLIERS. THE DEFECTIVE PIECES WERE GIVEN BACK TO THE SUPPLIERS FOR REPAIRING. HOWEVER, SUBSEQUENTLY IN HIS STATEMENT ON 8.12.2004, SHRI ASHOK GULECHHA HAS S TATED THAT THE DIAMONDS RECEIVED FROM THE SUPPLIERS WERE GIVEN TO SHRI NARENDRA SANGHVI, PARTNER OF M/S. SNEJAY GEMS FOR REPAIRING. ACCORDING TO THE AO, THERE WAS A CONTRADICTION IN THE TWO STATEMENT GIVEN BY SHRI ASHOK GULECHHA. 6.5. THE ASSESSEE WAS ASKED TO SHOW CAUSE AS TO WHY THE ABOVE QUANTITY OF DIAMONDS RECEIVED FROM M/S. SNEJAY GEMS SHOULD NOT BE TREATED AS YOUR UNACCOUNTED PURCHASE AND BROUGHT TO TAX AS YOUR UNDISCLOSED INCOME FOR THE RELEVANT PERIOD. THE ASSESSEE FILED A DETAILED REPLY VID E ITS LETTER DATED 22.12.2006. IT WAS STRONGLY M/S. SUNJYOT GEMS 5 CONTENDED THAT THE ASSESSEE IS ONLY A MIDDLEMAN/COMMISSION AGENT/BROKER AND DO THE JOB ON BROKERAGE AND COMMISSION BASIS. IT WAS EXPLAINED THAT THE QUANTITY MENTIONED IN THE PAGES 23 TO 32 OF ANNEXURE - A1 DO NOT BELONG TO THE ASSESSEE AND IS NOT THE PROPERTY OF THE FIRM/ANY OF THE PARTNERS OF THE FIRM. IN SUPPORT OF ITS CONTENTION/CLAIM, THE ASSESSEE FILED THE LIST OF EXPORTERS ON WHOSE BEHALF IT HAD RECEIVED THE DIAMONDS FOR NECESSARY REPAIRING/RESHAPING PR OCESS TO MEET THE INTERNATIONAL REQUIREMENTS. THE DETAILS OF EXPORTERS GIVEN WHICH READ AS UNDER: SR. NO. NAME OF PRINCIPALS CTS COMMISSION EARNED BY COMMISSION (RS. ) 1. SHITAL DIAM 535.94 SUJYOT GEMS 32872 2. S. JOGANI & CO. 371.14 SUJYOT GEMS 23870 3. NAVIN GEMS 265.02 SUJYOT GEMS 24557 4. SHREERAMKRISHNA EXPORTS 500.09 SUJYOT GEMS 32590 5. EVEREST ENTERPRISES 185.17 ASHOK KR GULECHHA 11894 6. DHARMANANDAN DIAMONDS 679.46 ASHOK KR GULECHHA 57941 7. SHITAL GEMS P. LTD. 679.46 ASHOK KR GULECHHA 11159 8. SHITAL GEMS PVT. LTD. 196.17 ASHOK KR GULECHHA 14619 9. MANI EXPORTS 207.93 ASHOK KR GULECHHA 17825 10. VAGHASIA BROS 317.58 ASHOK KR GULECHHA 17557 11. J ANU EXPORTS P. LTD. 246.55 ASHOK KR GULECHHA 13971 12. D NITIN &CO. 285.53 ASHOK KR GULECHHA 21757 13. SHREERAMKRISHAN EXPORT 449.76 RAKESH MALHOTRA 32218 TOTAL 4462.36 COMMISSION EARNED 312830 6.6. THE ASSESSEE FURTHER EXPLAINED THAT SINCE IT IS NOT EQUIPPED WITH THE REQUIRED MACHINERY FOR THE CUTTING AND POLISHING, IT HAS APPOINTED SHRI NARENDRA SANGHVI TO CARRY OUT THE NECESSARY REPAIRING M/S. SUNJYOT GEMS 6 UNDER ASSESSEES SUPERVISION. THE ASSESSEE ALSO ENCLOSED TH E RELEVANT DOCUMENTS IN RESPECT OF THE EXPORTERS (PRINCIPALS) ON WHOSE BEHALF IT HAD CARRIED OUT THESE JOBS. FROM THE EXPORT BILLS, IT WAS EXPLAINED THAT SUCH GOODS WERE EXPORTED TO THE OVERSEAS CUSTOMER BY ITS PRINCIPALS. IT WAS FURTHER EXPLAINED THAT E XPORT REALIZATION OF SUCH EXPORT BILLS WERE REALIZED BY THE PRINCIPALS DIRECTLY AND THE ASSESSEE HAS ONLY EARNED BROKERAGE/COMMISSION. 6.7. THE ASSESSEE STRONGLY CONTENDED THAT THERE IS NO EVIDENCE OR STATEMENT ON THE RECORD OF THE PARTIES STATING THAT TH E DIAMONDS HAVE EITHER BEEN PURCHASED DIRECTLY BY THE ASSESSEE FIRM/OR ITS PARTNERS. SINCE THE DIAMONDS DO NOT BELONG TO THE FIRM , ONLY BROKERAGE INCOME IN RESPECT OF THE AFOREMENTIONED TRANSACTION HAD BEEN RECORDED. 6.8. THE ASSESSEES CONTENTION/SUBMIS SION WAS EXAMINED BY THE AO IN THE LIGHT OF THE STATEMENT GIVEN BY SHRI ASHOK GULECHHA. THE AO WAS OF THE FIRM BELIEF THAT PRIOR TO 27.1.2003 AND SUBSEQUENT TO 11.8.2003, THE ASSESSEE HAS NOT REFERRED ANY REPAIRING WORK TO SHRI NARENDRA SANGHAVI. FURTH ER, IN ITS RETURN OF INCOME FROM A.Y. 2003 - 04 AND 2004 - 05, THE ASSESSEE HAS NOT CLAIMED ANY REPAIR EXPENSES TOWARDS SNEJAY GEMS NOR SNEJAY GEMS HAS SHOWN ANY INCOME BY WAY OF REPAIRING CHARGES. REFERRING TO THE STATEMENT OF SHRI NARENDRA SANGHAVI, THE AO OBSERVED THAT IN HIS REPLY THE SAID SHRI NARENDRA SANGHAVI HAS CATEGORICALLY STATED THAT HE HAS NO BUSINESS TRANSACTION WITH SHRI ASHOK GULECHHA. WHILE RUBBISHING THE CLAIM OF THE ASSESSEE, THE AO FURTHER OBSERVED THAT THE ASSESSEE HAS NOT SUBMITTED AN Y ACKNOWLEDGEMENT OF THE PARTIES FROM WHOM IT IS CLAIMING TO HAVE RECEIVED THE DIAMONDS FOR REPAIR WORK. DRAWING SUPPORT FROM VARIOUS JUDICIAL DECISIONS REFERRED TO AT PAGE - 1 OF HIS M/S. SUNJYOT GEMS 7 ORDER, THE AO WAS CONVINCED THAT THE ASSESSEE HAS GROSSLY FAILED TO DISCH ARGE THE BURDEN OF PROOF CAST UPON IT AND PR O CE E DED BY MAKING THE ADDITION U/S. 69 OF THE ACT AS UNEXPLAINED INVESTMENT BY TAKING THE VALUE OF STOCK 1390.70 CTS @ 16,600 PER CTS AND MADE THE ADDITION OF RS. 2,30,85,620/ - 7. AGGRIEVED, ASSESSEE CARRIED T HE MATTER BEFORE THE LD. CIT(A) AND REITERATED WHAT HAS BEEN STATED DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS BUT FAILED TO CONVINCE THE LD. CIT(A). 7.1. HOWEVER, AT THE SAME TIME THE LD. CIT(A) WAS OF THE OPINION THAT THE ENTIRE ADDITION MADE BY TH E AO CANNOT BE SUSTAINED. THE LD. CIT(A) WAS OF THE OPINION THAT FROM THE SEIZED MATERIAL, THE DIAMONDS IN POSSESSION OF THE ASSESSEE FOR EVERY 15 DAYS OF THE MONTH WERE AS FOLLOWS: PERIOD DIAMONDS PURCHASED IN CARRATS 16.01.03 TO 31 - 01 - 03 160.1 01.02.03 TO 15.2.03 NIL 16.2.03 TO 28.2.03 391.7 1.3.03 TO 15.3.03 378.9 16.3.03 TO 31.3.03 616.15 01.4.03 TO 15.4.03 665.19 16.4.03 TO 30.4.03 707.77 1.5.03 TO 15.5.03 NIL 16.5.03 TO 31.5.03 140.37 01.06.03 TO 15.06.03 NIL 16.6.03 TO 30.06.03 158.64 M/S. SUNJYOT GEMS 8 01.7.03 TO 15.07.03 452.48 16.7.03 TO 31.07.03 134.9 1.08.03 TO 15.08.03 719.98 7.2. IN THE LIGHT OF THE AFOREMENTIONED DETAILS, THE LD. CIT(A) WAS OF THE OPINION THAT THE DIAMONDS PURCHASED IN THE FIRST 15 DAYS OF MARCH, 2003 W ERE SOLD AND THAT CASH IS AVAILABLE FOR PURCHASE FROM 16.3.03 TO 31 ST MARCH, 2003. FROM THE AFOREMENTIONED CHART, IT CAN BE SEEN THAT THE MAXIMUM QUANTUM OF PURCHASES IS DURING 16.3.03 TO 31.3.03 WHICH IS RELEVANT TO ASSESSMENT YEAR 2003 - 04 WHICH ACCORDING T O THE LD. CIT(A) SHOULD BE CONSIDERED AS SEED CAPITAL. ACCORDING TO THE LD. CIT(A), THE SEED CAPITAL HAS TO BE ASSESSED IN A.Y 2003 - 04 WHICH COMES TO RS. 1,02,28,090/ - . APART FROM THE SEED CAPITAL, THE PROFIT EARNED FROM UNACCOUNTED SALES IS ESTIMATED AT 5%. THE LD. CIT(A) FURTHER DIRECTED FOR MAKING THE ADDITION OF RS. 11,54,281/ - AND FINALLY DIRECTED THE AO TO RESTRICT THE ADDITION AT RS. 1,13,82,371/ - INSTEAD OF RS. 2,30,85,620/ - . 8. AGGRIEVED BY THIS BOTH ASSESSEE AND THE REVENUE ARE IN APPEAL BEF ORE US. 9. AS MENTIONED ELSEWHERE, WE HAVE HEARD THE RIVAL CONTENTIONS AT LENGTH. THE ENTIRE ADDITIONS HAVE BEEN MADE ON THE STRENGTH OF ONE REGISTER FOUND AT THE TIME OF SEARCH , THE CONTENTS OF WHICH AS MENTIONED ELSEWHERE ARE EXHIBITED AT PARA - 3 OF TH E ASSESSMENT ORDER. IT CONTAINS THE DATE, LOT. PIECES, OUTGOING WEIGHT, RETURN BACK WEIGHT, RECEIVED DATE, SIGN AND RECEIVERS SIGNATURES. THE RETURN BACK WEIGHT IS LESS THAN THE OUTGOING WEIGHT WHICH MEANS THAT AFTER REPAIRING AND DOING THE NECESSARY WORK ON THE DIAMONDS , THE RETUR N M/S. SUNJYOT GEMS 9 BACK WEIGHT IS LESSER THAN THE WEIGHT AT THE TIME WHEN THE DIAMOND WAS GIVEN FOR REPAIR WORK . UNDER THE HEAD SIGN, NAME OF SHRI NARENDRA SANGHAVI IS MENTIONED UNDER THE HEAD RECEIVERS SIGNATURE SUNJ YOT GEMS EMPLOYEE IS MENTI ONED. IT IS AN UNDISPUTED FACT THAT BARRING THIS REGISTER, THERE IS NOTHING FOUND AT THE TIME OF SEARCH WHICH COULD SUGGEST THAT THE ASSESSEE HAS PURCHASED DIAMONDS AND THE SAME HAVE BEEN SUBSEQUENTLY SOLD OUTSIDE THE BOOKS OF ACCOUNT. THIS BECOMES MORE PERTINENT AND MORE RELEVANT WHEN WE CONSIDER THE FACT THAT THE ASSESSEE WAS FOUND IN POSSESSION OF 3110.67 CARATS OF DIAMONDS OUT OF WHICH 1188.59 CARATS OF DIAMONDS WERE ACCEPTED BY THE ASSESSEE A S ITS UNDISCLOSED STOCK AND IN RESPECT OF THE BALANCE, THE AO HAS ACCEPTED THE EXPLANATION MADE BY THE ASSESSEE. THUS, THE ALLEGATION OF THE REVENUE AUTHORITIES THAT THE ASSESSEE HAS PURCHASED DIAMONDS FROM M/S. S NEJAY GEMS ( SHRI NARENDRA SANGHAVI ) , OUTSIDE THE BOOKS OF ACCOUN T S WERE NOT FOUND PHYSICALLY AT THE TIME OF SEARCH . WHATEVER WAS FOUND PHYSICALLY WAS DULY EXPLAINED/ACCEPTED AS UNDISCLOSED STOCK. ONCE THE ADDITION HAS BEEN MADE IN RESPECT OF UNDISCLOSED STOCK AT THE TIME OF SEARCH, FURTHER ADDITION WOULD AMOUNT TO DOUB LE ADDITION. 10. DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS, THE ASSESSEE HAD SUBMITTED LIST OF EXPORTERS ON WHOSE BEHALF IT HAS RECEIVED THE DIAMONDS FOR NECESSARY REPAIRING/RESHAPING PROCESS TO MEET THE INTERNATIONAL REQUIREMENTS. A REMAND REPO RT WAS CALLED BY THE FIRST APPELLATE AUTHORITY VIDE LETTER DATED 9.1.2009 WHICH IS EXTRACTED AT PAGE - 8 OF THE LD. CIT(A)S ORDER. THE REMAND REPORT WAS SUBMITTED BY THE AO VIDE LETTER DATED 11.2.2009 WHICH IS EXTRACTED AT PARA - 8.1. OF CIT(A)S ORDER. IN HIS REMAND REPORT, THE AO HAS MENTIONED THAT SUMMONS WERE ISSUED TO THE PARTIES MENTIONED BY THE ASSESSEE, ALL M/S. SUNJYOT GEMS 10 THE SUMMONS WERE SERVED ON THEIR ADDRESS AND ALL THE PARTIES HAVE CONFIRMED THE TRANSACTION BY FURNISHING NECESSARY DOCUMENTARY EVIDENCES IN SUPP ORT OF THEIR CLAIM. 10.1. A FURTHER REMAND REPORT WAS SUBMITTED BY THE AO WHICH IS EXTRACTED AT PARA - 8.2 OF CIT(A)S ORDER WHEREIN ONCE AGAIN THE AO EXAMINED THE CREDIT WORTHINESS OF THE PARTIES WHO HAVE STATED TO HAVE GIVEN THEIR STOCK OF DIAMONDS FOR A SSORTMENT, INSPECTION ETC. TO THE ASSESSEE. 10.2. THE FIRST APPELLATE AUTHORITY ONCE AGAIN CALLED FOR FURTHER REPORT VIDE LETTER DATED 20.3. 2009 WHICH IS EXTRACTED AT PARA - 9 OF CIT(A)S ORDER, IN RESPONSE TO WHICH THE AO SUBMITTED A FINAL REPORT ON 26 .3.2009 WHICH IS EXTRACTED AT PARA - 10.1 OF CIT(A)S ORDER. IN THIS FINAL REPORT, THE AO OBSERVED THAT ALL THE PARTIES HAVE CATEGORICALLY STATED THAT JANGAD WHICH WAS USED FOR MOVEMENT OF STOCK OF DIAMONDS AS PER MARKET PRACTICE PREVAILING IN THE LINE OF DIAMOND TRADE COULD NOT BE PRESERVED. THE AO FURTHER OBSERVED THAT THE ASSESSEE HAD EARLIER GIVEN THE LIST OF THE NAMES OF THE PARTIES BEFORE THE DDI IN THE COURSE P O ST SEARCH ENQUIRIES WHICH TALLY WITH THE LIST FURNISHED NOW. ALL THE EXPORTING PARTIES H AVE IN RESPONSE TO SUMMONS U/S. 131 OF THE ACT CONFIRMED THAT THEY HAD GIVEN DIAMONDS FOR ASSORTING RESHAPING AND REPAIRING TO THE ASSESSEE AND RECEIVED BACK THE SAME FOR EXPORT. SO FAR AS THE CREDIT WORTHINESS OF THE PARTIES IS CONCERNED, IT IS PERTINEN T TO INFORM THAT AS REPORTED VIDE AOS LETTER DATED 9.3.2009, THE PARTIES HAVE SUBMITTED COPIES OF ACKNOWLEDGEMENT OF RETURN OF INCOME GIVING TOTAL INCOME OFFERED. M/S. SUNJYOT GEMS 11 10.3. CONSIDERING THE ENTIRE FACTUAL MATRIX IN THE LIGHT OF THREE REMAND REPORTS OF THE AO MENTIONED ELSEWHERE, THE UNDENIABLE FACTS EMERGED OUT OF THIS IS THAT THE DIAMONDS WERE BELONGING TO VARIOUS EXPORTERS AND FROM THE REMAND REPORTS SUBMITTED BY THE AO, IT CAN BE SEEN THAT THE VARIOUS EXPORTERS HAVE EXPORTED THEIR DIAMONDS THROUGH THE ASSE SSEE AND HAVE PAID COMMISSION TO THE ASSESSEE. IT IS FURTHER SEEN THAT THE EXPORTERS HAVE ADMITTED THAT THEY HAD SENT THEIR DIAMONDS TO THE ASSESSEE FOR APPROVAL. IT IS WORTHWHILE TO MENTION HERE THAT THE DATE MENTIONED IN THE SEIZED DOCUMENT IS PRIOR TO THE DATE OF EXPORT BY THE EXPORTERS WHICH CONCLUSIVELY PROVE THAT THE DATE OF EXPORT IS SUBSEQUENT TO THE DATE MENTIONED IN THE SEIZED MATERIALS. FOR THE SAKE OF REPETITION FROM THE ENQUIRIES CONDUCTED BY THE AO DURING THE REMAND PROCEEDINGS, IT CAN BE S EEN THAT THE EXPORTERS HAVE CONFIRMED THAT THEY HAVE GIVEN THE DIAMONDS FOR APPROVAL. ONCE AGAIN FOR THE SAKE OF REPETITION, THE PHYSICAL STOCK FOUND AT THE TIME OF SEARCH HAVE BEEN DULY EXPLAINED AND ACCEPTED BY THE AO. 10.4. IN THE LIGHT OF THE DISCUSSION MADE HEREIN A BOVE, IN OUR UNDERSTANDING OF THE FACTS OF THE CASE IN HAND, WE ARE OF THE CONSIDERED OPINION THAT THE IMPUGNED ADDITION IS UNCALLED FOR AS THE DIAMONDS DO NOT BELONG TO THE ASSESSEE. WE, THEREFORE , DO NOT FIND ANY MERIT IN THE ADDITIONS MADE BY THE AO U/S 69 OF THE ACT AND SIMULTANEOUSLY WE ALSO DO NOT FIND ANY LOGIC IN THE ADDITIONS SUSTAINED BY THE LD. CIT(A). WE, ACCORDINGLY DIRECT THE AO TO DELETE THE ENTIRE ADDITION MADE U/S. 69 OF THE ACT. G ROUND NO. 3 IS ACCORDINGLY ALLOWED. M/S. SUNJYOT GEMS 12 11. GROUND NO. 4 RELATES TO THE LEVY OF INTEREST U/S. 234 B AND 234C OF THE ACT. THE LEVY OF INTEREST IS MANDATORY THOUGH CONSEQUENTIAL. WE, ACCORDINGLY DIRECT THE AO TO CHARGE INTEREST AS PER PROVISIONS OF THE LAW. 12. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ITA NO. 4803/M/2010 A.Y. 2003 - 04 REVENUES APPEAL 13. AS MENTIONED ELSEWHERE IN ASSESSEES APPEAL, THE REVENUE IS IN APPEAL AGAINST THE RELIEF GIVEN BY THE LD. CIT(A) WHILE PAR TIALLY CONFIRMING THE ADDITION MADE BY THE AO. AS WE HAVE DIRECTED THE AO TO DELETE THE ENTIRE ADDITION MADE U/S. 69 OF THE ACT, REVENUES APPEAL IS DISMISSED. ITA NO. 4829/M/2010 - A.Y. 2004 - 05 ASSESSEES APPEAL 14. GROUND NO. 1 IS IDENTICAL TO GROUN D NO. 1 OF ASSESSEES APPEAL IN ITA NO. 4828/M/2010 FOR A.Y. 2003 - 04. FOR SIMILAR REASON GROUND NO. 1 IS DISMISSED. 15. GROUND NO. 2 IS DISMISSED AS NOT PRESSED. 16. GRIEVANCE RAISED VIDE GROUND NO. 3 IS A NEW SET OF FACTS WHICH RELATE TO THE RESULTS O F SURVEY UNDERTAKEN IN THE OFFICE OF M/S. ANOOP EXPORTS WHICH WAS A PART OF SEARCHES CARRIED OUT IN THE CASE OF BARADIA GROUP OF RAIPUR . THESE LOOSE SHEETS FORMED A VIRTUAL CASH BOOK OF UNACCOUNTED CASH TRANSACTIONS FROM 1.4.2003 TO 29.9.2004. THESE L OOSE SHEETS WERE MAINTAINED BY SHRI NARESH TUKARAM TANDALE, OFFICE ASSISTANT OF MUMBAI BRANCH OF BARADIA GROUP, RAIPUR. M/S. SUNJYOT GEMS 13 16.1. THE CASH RECEIVED WAS UTILIZED BY SHRI NARESH TUKARAM TANDALE FOR MAKING CASH PURCHASES OF GO L D EWELLERY AND DIAMONDS AND FOR ME ETING DAY TODAY EXPENSES AND FOR MAKING PAYMENTS TO VARIOUS PARTIES AS PER THE INSTRUCTIONS OF THE OWNERS/PARTNERS. AS PER THE DETAILS OF CASH ACCOUNT, IT WAS FOUND THAT THE FOLLOWING PAYMENTS WERE MADE TO SHRI ASHOK GULECHA PARTNER OF M/S. SUNJYOT GEMS. DATE OF PAYMENT AMOUNT (RS) 07.04.2003 1,00,000/ - 08.05.2003 5,56,000/ - 14.05.2003 5,00,000/ - 25.06.2003 7,00,000/ - 02.08.2003 3,50,000/ - 17.09.2003 3,00,000/ - 19.02.2004 4,00,000/ - 29.02.2004 5,00,000/ - 05.03.2004 5,00,000/ - 17.03.2004 3,00,000/ - 08.05.2004 8,00,000/ - 27.08.2004 5,00,000/ - 06.09.2004 5,00,000/ - TOTAL 60,06,000/ - 16.2. STATEMENT OF SHRI NARESH TANDALE WAS RECORDED ON 30.9.2004 WHEREIN HE STATED THAT CASH PAYMENTS WERE MADE BY HIM AS PER THE INSTRUCTIONS RECEIVED FROM THE PARTNERS OF BARADIA GROUP, RAIPUR THOUGH HE WAS NOT AWARE ABOUT THE TRANSACTIONS INVOLVED. M/S. SUNJYOT GEMS 14 16.3. ST ATEMENT OF SHRI ASHOK GULECHA WAS ALSO RECORDED IN RESPECT OF THE PAYMENTS RECEIVED FROM SHRI NARESH TANDALE AND IN HIS STATEMENT SHRI ASHOK GULECHA ACCEPTED THAT M/S. SANJYOT GEMS (ASSESSEE) HAD ARRANGED PAYMENTS FROM SELLERS IN THE DIAMOND MARKET FOR B AR A DIA GROUP OF RAIPUR SINCE HEAVY DISCOUNT WAS OFFERED FOR PURCHASES MADE IN CASH . HE HAS TAKEN CASH FROM SHRI NARESH TANDALE AND PAID DIRECTLY TO THE SELLERS, FOR THIS SHRI ASHOK GULECHA WAS P ROMISED BROKERAGE @ 0.25%. THE STATEMENT OF SHRI ASHOK GUL ECHA WAS FOUND TO BE IN CONTRADICTION TO THE STATEMENT GIVEN BY SHRI NARESH TANDALE. THE AO WAS OF THE OPINION THAT IF SHRI ASHOK GULECHA , ACTING AS A BROKER FOR THE PURCHASES MADE BY BARADIA GROUP, HE FAILED TO IDENTIFY ANY OF THE SELLERS FROM WHOM PURCH ASES WERE MADE , EVEN THE CLAIM OF BROKERAGE OF 0.25% IS NOT SUPPORTED BY ANY EVIDENCE. THE AO WAS OF THE FIRM BELIEF THAT THE CASH RECEIVED BY SHRI ASHOK GULECH A IS NOTHING BUT THE SALE CONSIDERATION OF THE SALES MADE BY THE ASSESSEE FIRM OUTSIDE ITS BOO KS OF ACCOUNT. AS PER THE SEIZED DOCUMENTS, THE CASH RECEIPTS PERTAIN TO FINANCIAL YEAR 2003 - 04 AND 2004 - 05 RELATING TO ASSESSMENT YEARS 2004 - 05 AND 2005 - 06 RESPECTIVELY, THEREFORE, THE UNACCOUNTED CASH SALES WAS TAKEN AT RS. 75.56 LAKHS AND ACCORDINGLY ADDITIONS WERE MADE IN RESPECTIVE ASSESSMENT YEARS. 17. THE ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A) BUT WITHOUT ANY SUCCESS. 18. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE VEHEMENTLY SUBMITTED THAT THE SURVEY OPERATION WAS CONDUCTED AT THE PR EMISES WHICH BELONG TO THE BARADIA GROUP WHICH WAS IN CONNECTION WITH SEARCH OPERATION CONDUCTED AT RAIPUR. IT IS THE SAY OF THE LD. COUNSEL M/S. SUNJYOT GEMS 15 THAT THE ENTIRE ADDITION IS MADE ON THE BASIS OF LOOSE SHEET FOUND AT THE TIME OF SURVEY WHICH REFLECTED CASH PAYMENTS BY NARESH TANDALE TO SHRI ASHOK G ULECHA WHICH HAS BEEN PRESUMED AS SALE CONSIDERATION FOR SALES MADE OUTSIDE THE BOOKS OF ACCOUNT BY THE ASSESSEE. THE LD. COUNSEL STATED THAT EXCEPT FOR THES E CONJECTURES AND SURMISES, THERE IS NO EVIDENCE TO SUPPORT THE ALLEGATIONS MADE BY THE REVENUE AUTHORITIES. 19. PER CONTRA, THE LD. DEPARTMENTAL REPRESENTATIVE STRONGLY SUPPORTED THE FINDINGS OF THE AO. 20. WE HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE ORDERS OF THE AUTHORITIES BELOW. IT IS AN UNDISPUTED FACT THAT THE LOOSE SHEET WERE FOUND FROM THE PREMISES BELONGING TO BARADIA GROUP. IT IS ALSO AN UNDISPUTED FACT THAT SEARCH OPERATIONS WERE CONDUCTED AT THE PREMISES OF BARADIA GROUP, RAIPUR. IN HIS STATEMENT, THE OFFICE ASSISTANCE OF BARADIA GROUP SHRI NARESH TANDALE STATED THAT HE HAS BEEN MAKING PAYMENTS TO VARIOUS PARTIES AS PER THE INSTRUCTIONS OF THE PARTNERS OF BARADIA GROUP. HOWEVER, WE DO NOT FIND ANY CORROBORATIVE EVIDENCE FROM THE PAR TNERS OF BARADIA GROUP WHICH COULD CONCLUSIVELY PROVE THAT THE ASSESSEE HAD MADE SALES TO THE SAID GROUP IN LIEU OF WHICH IT HAS RECEIVED CASH PAYMENTS FROM NARESH TANDALE. IT CAN BE SEEN THAT EVEN NARESH TANDALE WAS UNAWARE OF THE FACT AS TO WHY CASH P AYMENTS ARE BEING MADE TO SHRI ASHOK G ULECHA. THE REVENUE HAS NOT BROUGHT ANY DOCUMENTARY EVIDENCE ON RECORD TO SHOW THAT THE ASSESSEE WAS INDULGED IN SALES OUTSIDE ITS BOOKS OF ACCOUNTS. IN OUR CONSIDERED OPINION, THE ENTIRE ADDITION APPEARS TO BE MAD E PURELY ON PRESUMPTION, SURMISES AND CONJECTURES. THE ADDITIONS MADE PURELY ON CONJECTURES AND SURMISES CANNOT BE M/S. SUNJYOT GEMS 16 SUSTAINED WITHOUT ANY SUPPORTING CORROBORATIVE DOCUMENTARY EVIDENCES WHICH IN OUR CONSIDERED OPINION, THE REVENUE HAS GROSSLY FAILED TO BRIN G ON RECORD. WE, THEREFORE, SET ASIDE THE FINDINGS OF THE LD. CIT(A) AND DIRECT THE AO TO DELETE THE IMPUGNED ADDITIONS BASED ON THE PIECE OF PAPER FOUND WITH NARESH TANDALE OF ANOOP EXPORTS. GROUND NO. 3 IS ACCORDINGLY ALLOWED. 21. FACTS RELATING TO G ROUND NO. 4 ARE SAME AS THE FACTS CONSIDERED BY US IN GROUND NO. 3 IN ITA NO. 4828/M/10 FOR A.Y. 2003 - 04. FOR SIMILAR REASONS AND FOR OUR DETAILED DISCUSSION THEREIN, THE IMPUGNED ADDITIONS ARE DIRECTED TO BE DELETED. GROUND NO. 4 IS ACCORDINGLY ALLOWED. 22. GROUND NO. 5 RELATES TO THE LEVY OF INTEREST U/S. 234B AND 234C OF THE ACT. THE LEVY OF INTEREST IS MANDATORY THOUGH CONSEQUENTIAL. WE, ACCORDINGLY DIRECT THE AO TO CHARGE INTEREST AS PER PROVISIONS OF THE LAW. 23. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ITA NO. 4844/M/2010 A.Y. 2004 - 05 REVENUES APPEAL 24. THE GRIEVANCES OF THE REVENUE RELATE TO THE SAME SET OF FACTS CONSIDERED BY US IN ITA NO. 4828 & 4803/M/2010 FOR A.Y. 2003 - 04. FOR OUR DETAILED DISCUSSION THEREIN, THE APPEAL FILED BY THE REVENUE IS DISMISSED. ITA NO. 5550 /M/2010 - A.Y. 200 5 - 0 6 ASSESSEES APPEAL M/S. SUNJYOT GEMS 17 25. GROUND NO. 1 IS NOT PRESSED ACCORDINGLY IT IS DISMISSED AS NOT PRESSED. 26. FA CTS IN GROUND NO. 2 ARE IDENTICAL TO THE FACTS CONSIDERED BY US IN ITA NO. 4828/M/10 QUA GROUND NO. 3. FOR OUR DETAILED DISCUSSION THEREIN, THE IMPUGNED ADDITION IS DIRECTED TO BE DELETED. 27. GROUND NO. 3 RELATES TO THE LEVY OF INTEREST U/S. 234B AND 234C OF THE ACT. THE LEVY OF INTEREST IS MANDATORY THOUGH CONSEQUENTIAL. WE, ACCORDINGLY DIRECT THE AO TO CHARGE INTEREST AS PER PROVISIONS OF THE LAW. ITA NO. 6030 /M/2010 A.Y. 200 5 - 0 6 REVENUES APPEAL 28. THE GRIEVANCES OF THE REVENUE RELATE TO THE SAME SET OF FACTS CONSIDERED BY US IN ITA NO. 4828 & 4803/M/2010 FOR A.Y. 2003 - 04. FOR OUR DETAILED DISCUSSION THEREIN, THE APPEAL FILED BY THE REVENUE IS DISMISSED. 29. IN THE RESULT, THE APPEALS FILED BY THE ASSESSEE ARE PARTLY ALLOWED AND THE APPEALS FILED BY THE REVENUE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH SEPTEMBER , 2015 SD/ - SD/ - ( RAM L AL NEGI ) (N.K. BILLAIYA) /JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; DATED : 30 TH SEPTEMBER , 2015 . . ./ RJ , SR. PS M/S. SUNJYOT GEMS 18 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . / BY ORDER, //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI