DCIT, Cir. -7(1), Kolkata V. M/s Shree Jewellers Pvt. Ltd., Kolkata

ITA 593/KOL/2021

AI Insights

The case involves appeals by the Revenue against the orders of the CIT(A) which had deleted the additions made by the Assessing Officer under sections 69C and 68 of the Income Tax Act. The Revenue challenged the CIT(A)'s decision on grounds that the assessee had not fulfilled the criteria of identity, creditworthiness, and genuineness of transactions for the alleged bogus purchases and unsecured loans. The Tribunal examined the evidence presented, including invoices, bank statements, and the circumstances of retracted statements, and found that the assessee had adequately substantiated its claims. The Tribunal also noted that the sales made by the assessee, which were not disputed, corroborated the genuineness of the purchases.

• Counselvise Citation: [2022] 140 COUNSELVISE.COM (IT) 128345 (ITAT-KOLKATA)
• Duration Of Justice: 11 year(s) 10 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-11-2022
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 10-10-2022
• Assessment Year: misc
• Appeal Filed On: 21-01-2011
• Other Referred Cases: Ashwin Purshotam Bajaj vs. ITC (ITAT Mumbai), Sanju Jalan, Kolkata vs ITO, Ward 36(3), Kolkata, M/s. M. B. Jewellers & Sons vs DCIT, Circle 44, Kolkata, ITO ward-33(1), Kolkata vs Saraf Jewels & Co., CAT vs Alpha Hydronics Pvt Ltd, M/s M.B. Jeweller & Sons vs. DCIT, Circle-44 Kolkata
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Bogus purchase; Search and seizure; Principle of natural justice; Source of fund; Accommodation entries; Retraction; TDS
• Section: 132; 69C; 14A; 143(1); 250; 208; 72; 22

Judgement Text

आयकर अपीलȣय अͬधकरण, कोलकाता पीठ ‘सी’, कोलकाता IN THE INCOME TAX APPELLATE TRIBUNAL “C” BENCH KOLKATA Įी संजय गग[, ÛयाǓयक सदèय एवं Įी मनीष बोरड, लेखा सदèय के सम¢ Before Shri Sanjay Garg, Judicial Member and Dr. Manish Borad, Accountant Member I.T.A Nos.591,592&593/Kol/2021 Assessment years: 2007-08, 2011-12 & 2012-13 DCIT, Circle-7(1), Kolkata.......................................................................Appellant vs. M/s Shreejee Jewellers Pvt. Ltd.........................................................Respondent 103, Park Street, Kolkata-700016. [PAN: AAECS8312C] Appearances by: Shri Rajeeva Kumar, AR, appeared on behalf of the appellant. Shri Partha Pratim Barman, Addl. CIT-DR, appeared on behalf of the Respondent. Date of concluding the hearing : October 11, 2022 Date of pronouncing the order : November 24, 2022 आदेश / ORDER संजय गग[, ÛयाǓयक सदèय ɮवारा / Per Sanjay Garg, Judicial Member: The captioned appeals have been preferred by the Revenue against the separate orders all dated 23.06.2021 of the National Faceless Appeal Centre (hereinafter referred to as the ‘CIT(A)’) passed u/s 250 of the Income Tax Act (hereinafter referred to as the ‘Act’). Since, the appeals pertained to the same assessee and common issues are involved and hence, all these appeals have been heard together and are being disposed off by this common order. The Revenue’s appeal ITA No.591/Kol/2021 for assessment year 2007-08 is taken as the lead case. 2. ITA No.591/Kol/2021 - The Revenue in this appeal has taken the following grounds of appeal: I.T.A Nos.591,592&593/Kol/2021 Assessment years: 2007-08, 2011-12 & 2012-13 M/s Shreejee Jewellers Pvt. Ltd. 2 “1. That on the facts & circumstances of the case and in law, the CIT(A) has erred in deleting the addition made u/s 69C of the act for Rs.1,49,20,200/-" 2. That on the facts & circumstances of the case and in law, the CIT(A) has erred by not following the principle of natural justice in respect of consideration of the retraction of statement u/s 132(4) of the act of Shri Rajendra Jain without giving an opportunity to the AO of being heard." 3. "That on the facts & circumstances of the case and in law, the CIT(A) has erred in not considering the facts that the assessee failed to fulfill the three criteria, i.e., identity & creditworthiness of the creditor and genuineness of the transaction, laid down by Several Courts despite asked the assessee company in course of scrutiny to do so." 4. "That the appellant craves leave to add to and/or alter, amend, modify or rescind the grounds hereinabove before or hearing of this appeal." 3. The brief facts of the case are that the assessee had filed its return of income showing total income of Rs.10,52,830/-. The return was processed u/s 143(1) of the Act. Thereafter, the Assessing Officer (in short ‘the A.O’) was in receipt of information from DGIT(Inv.), Mumbai that the assessee company had received bogus entry in the form of purchases from three shell companies namely Sparsh Exports Pvt. Ltd., Moulimani Impex Pvt. Ltd and Vitrag Jewels. The Assessing Officer, therefore, reopened the assessment and passed the impugned assessment order assessing the income of the assessee at Rs.1,59,73,026/- after disallowing a sum of Rs.1,49,20,200/- as bogus purchases under the provisions of section 69C of the Act. 4. Being aggrieved by the said order of the Assessing Officer, the assessee preferred appeal before the ld. CIT(A). The ld. Counsel for the assessee before the CIT(A) submitted that the Assessing Officer had neither provided the assessee copy of information received from the DGIT(Inv.), Mumbai nor the copy of statement recorded on which reliance was placed by him and further that the Assessing Officer had I.T.A Nos.591,592&593/Kol/2021 Assessment years: 2007-08, 2011-12 & 2012-13 M/s Shreejee Jewellers Pvt. Ltd. 3 not provided opportunity to the assessee to cross-examine the persons whose statement was recorded and relied upon by the DGIT(Inv.), Mumbai. That even the ld. Assessing Officer had not issued show-cause notice to the assessee company before making addition, which violated principle of natural justice. On factual merit, it was also explained before CIT(A) that considering the type of trade of assessee, diamonds are brought physically by the parties/their representatives/their brokers. These are highly valuable items (diamonds) contained in small packets and further that diamonds are to be personally examined by the concerned parties. Such system is regularly followed. Such purchase of diamonds is duly entered in the purchase cum stock register. It is out of such available stock that the goods were sold. Such sales could not have been made without existence of physical stock. Hence, the question of doubting the genuineness of such transactions did not arise. Thus, the transactions made with the concerned parties were all genuine and there was no scope of treating the transaction as "bogus purchase". The assessee also relied upon the CBDT’s instructions to its officers vide letter F.No.286/2/2003/IT(Inv) dated 11.03.2003, wherein, it has been instructed that the confessions in the course of search and seizure and survey operations do not serve any useful purpose and that there should be focus and concentration on collection of evidence of income and that no attempt should be made to obtain concession as undisclosed income. It was further pleaded that the reopening in this case was made on the basis of confessional statement of one Shri Rajendra Jain made before Investigation Wing, Mumbai, however, the said statement was retracted by said Shri Rajendra jain by way of an affidavit and, therefore, no I.T.A Nos.591,592&593/Kol/2021 Assessment years: 2007-08, 2011-12 & 2012-13 M/s Shreejee Jewellers Pvt. Ltd. 4 reliance could be placed on the retracted statement of Shri Rajendra Jain. That all the purchases were made through account payee cheque to the suppliers and that the copies of invoices for purchases and stock statement i.e. stock reconciliation statement giving complete details with regard to opening stock, purchases, sale and closing stock were provided and the books of accounts have not been rejected and even the sales have not been doubted. It was further submitted that the assessee company was engaged in the business of manufacturing and trading of Diamond Jewellery, Diamonds and Gold. The purchases treated bogus by the learned A.O. had been subsequently sold by the assessee company and the sales have not been doubted. It was further pleaded that even legally, entire purchases cannot be treated as bogus. The assessee further relied upon the decision of the Coordinate Mumbai Bench of the Tribunal in the case of “Ashwin Purshotam Bajaj vs. ITC (ITAT Mumbai) ITA. No. 4736/Mum/2014” that though the assessee could not produce the alleged bogus hawala suppliers, the entire purchases could not be added as undisclosed income. That the addition has to be restricted by estimating Gross Profit ratio on the purchases from the alleged accommodation entry providers. Further, assessee submitted the audited financial statements of the assessee company for the year ended 31.03.2007 alongwith Tax Audit Report for the year ended 31.03.2007 to show that the assessee company earned gross profit 5.98% on turnover. 5. The ld. CIT(A) considering the submissions of the assessee and after examination of the relevant evidences observed that the assessee had furnished the required documents to prove the genuineness of the I.T.A Nos.591,592&593/Kol/2021 Assessment years: 2007-08, 2011-12 & 2012-13 M/s Shreejee Jewellers Pvt. Ltd. 5 purchases. The relevant part of the order of the CIT(A), for the sake of ready reference, is reproduced as under: “During the cause of appellate proceedings, the appellant furnished the following documents Sparsh Exports Pvt. Ltd. 1. Copy of purchase invoice for the A.Y, 2007-08. 2. Company Master Data as per MCA site reflecting the registered address. 3. Acknowledgement of filing Income Tax Return for the A.Y. 2007-08. 4 Copy of PAN card. 5. Ledger of M/s Shreejee Jewellers Pvt. Ltd. in the books of M/s Sparsh Exports Pvt. Ltd. for the period 01/04/2006 to 31/03/2007 and 01/04/2007 and 31/03/2008. 6. Copy of bank statements of M/s Sparsh Exports Pvt. Ltd. reflecting the relevant transactions. 7. Ledger of M/s Sparsh Exports Pvt. Ltd. in the books of M/s Shreejee Jewellers Pvt. Ltd. for the period 01/04/2006 to 31/03/2007 and 01/04/2007 and 31/03/2008. 8. Copy of bank statements of M/s Shreejee Jewellers Pvt. Ltd. reflecting the relevant transactions. M/s. Mouli Mani lmpex Pvt. Ltd. 1. Copy of purchase invoices for the A.Y. 2007-08 1. Company Master Data as per MCA site reflecting the registered address. 2. Acknowledgement of filing Income Tax Return for the A.Y. 2007-08. 3. Copy of PAN card I.T.A Nos.591,592&593/Kol/2021 Assessment years: 2007-08, 2011-12 & 2012-13 M/s Shreejee Jewellers Pvt. Ltd. 6 4. Ledger of M/s Mouli Mani Impex Pvt. Ltd. in the books of M/s Shreejee Jewellers Pvt. Ltd. for the period 01/04/2006 to 31/03/2007 and 01/04/2007 and 31/03/2008 5. Copy of bank statements of M/s Shreejee Jewellers Pvt. Ltd. reflecting the relevant transactions. Vitrag Jewels (Proprietorship Firm of Mudit P. Karnawat) 1. Copy of purchase invoice for the A.Y. 2007-08. 2. Acknowledgement of filing Income Tax Return for the A.Y. 2007-08. 3. Copy of PAN card. 4. Ledger of M/s Shreejee Jewellers Pvt. Ltd. in the books of M/s Vitrag Jewels for the period 01/04/2006 to 31/03/2007 and 01/04/2007 and 31/03/2008. 6. Ledger of M/s Vitrag Jewels in the books of M/s Shreejee Jewellers Pvt. Ltd. for the period 01/04/2006 to 31/03/2007 and 01/04/2007 and 31/03/2008. 6. Copy of bank statements of M/s Shreejee Jewellers Pvt. Ltd. reflecting the relevant transactions. Further the appellant filed its Audited Statement of Accounts and Tax Audit Report for the year ended 31.03.2007 and also filed the copy of the following cases law of 1. Sanju Jalan, Kolkata vs ITO, Ward 36(3), Kolkata, ITA No. 634/Kol/2017 2. M/s. M. B. Jewellers & Sons vs DCIT, Circle 44, Kolkata (ITANo.1/Kol/20 17) - M/s Vitrag Jewels is also one of the disputed purchase of appellant company during year under Consideration, Hon’ble Jurisdictional ITAT elaborately dealt in this order. 3. ITO ward-33(1), Kolkata vs Saraf Jewels & Co. (ITA No. 1581/Kol/2016 and I.T.A Nos.591,592&593/Kol/2021 Assessment years: 2007-08, 2011-12 & 2012-13 M/s Shreejee Jewellers Pvt. Ltd. 7 4. Copy of order of CIT(A)_15, Kolkata in appeal No. 264/CIT(A)-15/18- 19/Cir-8(2)/R&T/KOL passed on 01.10.2019 for the A.Y. 2009-10 in case of M/s. Shreejee Jewellers Pvt. Ltd. (Appellant) 5.2 I have perused the materials available on record and find that the appellant was maintaining proper books of accounts including all the details, stock register, bills and vouchers in respect of its Manufactured and traded goods, in respect of specific purchases made from M/s Sparsh Exports Pvt. Ltd., M/s. Mouli Mani Impex Pvt. Ltd. and Vitrag Jewels. (i.e. the disputed purchases), the appellant had furnished the date of purchase together with its quantity, rate and value. The payments were made through Banking Channel. 5.3 Further, it is also relevant to note that the Hon'ble Jurisdictional ITAT in the case of M/s. M.B. Jewellers & sons vs. DCIT, Circle-44 Kolkata (ITA No. 1/Kol 2017). The Ld ITAT observed that "We have heard the rival submissions and perused the materials available on record including the paper book tied by the assessee comprising of pages1. We find that the assessee was maintaining proper books of accounts including all the details, stock registers, bills and vouchers in respect of its traded goods. All the purchases from the parties were made against proper bills and such goods were used in making jewellery and ornaments which were further sold as finished goods at profit and all major items of purchases are identifiable and are matched with subsequent sales. In respect of specific purchases made from N/s Vitrag Jewels (i. e. the disputed purchases before us), the assessee had furnished the date of purchase together with its quantity, rate and value and its corresponding sales various dates and items which were lying as closing stock fn the books together with the parties to whom such diamonds were sold and cheque realization thereon from the said customers. These details are enclosed in page 59 of the paper book filed before us. We find that the sales made by the assessee have been accepted by the revenue Hence the natural corollary is without the purchases, there cannot be any sales. But it does not automatically mean that the purchase would be entitled for deduction The purchases would be eligible for deduction only when the sources tor such purchases are explained. In the instant case, it is the case of the revenue that the assessee had issued account payee cheques to M/s Vitra Jewels(supplier of diamonds to assessee) and had received Cash n return from them and the said cash is utilized by the I.T.A Nos.591,592&593/Kol/2021 Assessment years: 2007-08, 2011-12 & 2012-13 M/s Shreejee Jewellers Pvt. Ltd. 8 assessee for purchase of diamonds from unknown parties in the grey market. We find that this is absolutely no evidence that is brought on record to prove that the assessee had indeed received cash back from Vitrag Jewels in lieu of Cheque issued to them or from any other party except making a wild allegation to that effect and by placing reliance on the statement of Shri Rajendra Jain. It is observed that Shri Rajendra Jain had subsequently retracted his statement by way of an affidavit deposing before the Notary Publicon 09.10.2014 (enclosed in pages ITA No. 1/Kol/2017 M/s. M. B. Jewellers &Sons AY 2007-08 96 to 100 Or paper book) He had also explained the circumstances under which the original statements had been recorded and effectively stated that the same was recorded under coercion and the statement recorded therein were as per the desire and will of the DDIT(inv) who recorded the statement Shri Rajendra Jain had also initially filed an affidavit on 21.10.2013 (enclosed in paged 91 to 95 of paper book) retracting the statement recorded by DDIT(Inv.). He also filed latter to DCIT Central Circle-4, Surat on 31.10.2014 explaining the entire facts of the case and the circumstances warranting him to file two affidavits (i. e. on 21.10.2013 and 09.01.2014 reiterating the same) (enclosed in pages 88 to 90 of paper book]. Hence, the version of the revenue that the assessee had received cash back in lieu of cheques issued to suppliers of diamonds, stands negated pursuant to the retraction of statement of Shri Rajendra Jain which is the only source of evidence available with the revenue and which had been heavily relied upon by the revenue. A statement once retracted cannot be treated as reliable source or an evidence to allege that the assessee had received cash back in lieu of cheques issued. It is observed that the tax audit report of the assessee clearly mentioned that the assessee is maintaining regular books of accounts including the day to day stock register and quantity and quality details of stock from which purchase, consumption and sale of stock was also proved. In response to the query raised by the AO regarding the purchases made from Vitrag Jewels and AVE Exports. The assessee furnished the bills containing the name, address as well as the sales tax numbers both Gujrat and Central sales tax together with the PAN of those parties from whom goods were purchased. The payments were made to them by account payee cheques. The tax auditor had reported the complete quantitative details of opening stock, purchases, stocks transferred, sales closing stock in respect of each showroom in respect of Gold, Gold I.T.A Nos.591,592&593/Kol/2021 Assessment years: 2007-08, 2011-12 & 2012-13 M/s Shreejee Jewellers Pvt. Ltd. 9 ornaments, diamonds, pearls and coloured stones which are enclosed in page 35 of the paper book. The AO vide his letter 1TA No. 1/Kol/2017 M/s M.B. Jewellers & Sons A. Y. 2007-2008 dated 7.7 2014 asked the assessee the details of purchases made from M/s Vitrag Jewels and N/s AVE Exports (though no addition has been made in respect of purchases from this party) in F.Y. 2005-06, 2006-07 and 2007-08 and the corresponding sales made thereon. The assessee filed a reply thereon vide letter dated 19.08.2014 enclosed in pages 46 to 52 of paper book. In the said letter the assessee had explained the modus operandi of its purchase activity in the following manner "It has been asked to explain manner of receipt of above said items of purchases in the hands of the assessee. It is to submit that normally as a general business practice, brokers/dealers from sarrafa bazaar/jewellery market (mainly from Surat and Mumbai). visit prospective buyer’s business place and display various items of diamonds and precious/semi- precious stones and the buyer makes the final selection and bills are subsequently raised by the seller directly. Naturally appellant had also been purchasing diamonds precious and semi-precious stones from outside dealers in the above manner. Furthermore, at time partners their close family members or family friends also visit the sellers place partners. Sometimes order are also placed over phone and goods are sent through trusted and regular couners. As a normal business practice goods are regularly received in the above stated manner However at the moment it is not possible to exactly recollect how the above consignments were received because of long time gap. The assessee had furnished the summary of diamonds movement for the period 1. 4. 2006 31.03.2007 indicating the quantity and value in opening balance purchases 53ies and closing balance (enclosed in page 53 of paper book) The appellant had also fled the purchase bills of M/S. Vitrag Jewels (enclosed in pages 68 lo 72 of the paper book) together with the ledger account of M/S. Vitrag Jewels as appearing in the books of the assessee firm for the period 1. 4.2006 to 31.3. 2007 and for the period 1. 4. 2007 to 31.3. 2008 wherein the payments were made to M/s. Vitrag Jewels by account payee cheques. Admittedly the payments were made to M/s Vitrag Jewels through account payee cheques on 22 2 2008 (Rs 10,00, 000/-) and on 27 03 2008 (Ps 5,57,470/-). Hence the primary allegation of the AO that the ITA No. 1/Ko/2017 M/s. M. B. Jewellers & Sons A Yr 2007-08 assessee had received the cash back in lieu of account I.T.A Nos.591,592&593/Kol/2021 Assessment years: 2007-08, 2011-12 & 2012-13 M/s Shreejee Jewellers Pvt. Ltd. 10 payee cheques issued from M/s Vitrag Jewels (based on the statement of Shri Rajendra Jain) and used the said cash for purchasing diamonds from unknown parties in the grey market. Gets defeated on this count also, in as much as the AO had accepted the fact that factum of purchases of diamonds indeed has seen made by the assessee in the Asst Year 2007- 08 (i. e. the year under appeal) and whereas the payments were made to Vitrag Jewels only in next Asst Year i.e. AY 2008-09. While this is so, It is highly impossible for M/s Vitrag Jewels to first hand over the cash even without receiving the cheques from the assessee. Hence no cash could be available with the assessee to make purchase of diamonds from unknown parties in the gray market in Asst Year 2007-08. Hence, the allegation of the AO only leads to impossible situation 5.4 A perusal of the P/L account of the appellant company shows that it has sale of Rs 16,54,83,245,32 and has filed Return of Income of Rs. 10,52,830/-. The appellant has maintained complete details of bills and vouchers. The books of account of the appellant company have been duly audited and appellant is maintaining quantity wise details of purchases, sale and opening and closing stock. It is also relevant note that in the case of M/s M. B. Jeweller & Sons Vs. DCIT, Circle-44 Kolkata that the Hon'ble ITAT observed that Sri Rajendra Jain had-subsequently retracted his statement by way of an affidavit deposing before the Notary Public on 09.01.2014. Therein the Hon 'ble ITAT has adjudicated that t is highly impossible for M/s. Vitrag Jewels to first hand over the cash even without receiving the cheques from the assessee. Hence, no cash could be available with the assessee to make purchase or diamonds from unknown parties in the grey market in Asst Year 2007-08. Hence, the allegation of the AO only leads to impossible situation. 5.5 Keeping in view the above mentioned facts and circumstances and the judicial pronouncement of the Hon'ble ITAT in the case of M/s M.B. Jewelers & sons vs. DCIT, Circle-44 Kolkata (1TA No.1/Kol/2017), Hon'ble Jurisdictional High Court in the case of CAT vs Alpha Hydronics Pvt Ltd in ITA No. 549 of 2004 dated 10.11.2014 wherein the facts are identical and similar to this appeal and in the case of appellant for the A.Y. 2009-10 wherein Hon'ble CIT(A)-15 Kolkata has granted full relief. Reliance upon the various Hon’ble Courts aforesaid jurisdictional pronouncements. I have considered the facts and find merit in the submission of the appellant full relief to the appellant by deleting the I.T.A Nos.591,592&593/Kol/2021 Assessment years: 2007-08, 2011-12 & 2012-13 M/s Shreejee Jewellers Pvt. Ltd. 11 addition made by the AO of Rs. 1,49.20,200/- and the grounds of appeal 1 to 4 is allowed.” 6. A perusal of the above order reveals that the ld. CIT(A) has thoroughly examined the evidence on record and found that the assessee has produced all the relevant evidences including complete details and bills and vouchers and further that the books of accounts of the company have been duly audited and further that the assessee has been maintaining quantitative details of purchases and sale and opening and closing stock. Further, the corresponding sales have not been doubted by the Assessing Officer. He also categorically held that even it was not a case of purchase of diamonds from grey market to suppress the gross profit. The ld. DR could not point out any specific error in the order of the CIT(A) justifying our interference. We do not find any merit in the appeal of the Revenue and the same is accordingly dismissed. 7. ITA No.592/Kol/2021 for assessment year 2011-12 - The Revenue in this appeal has taken the following grounds of appeal: 1. "That on the facts & circumstances of the case and in law, the CIT(A) has erred in deleting the addition made u/s 69C of the Act, for Rs.1,49,89,050/-" 2. "That on the facts & circumstances of the case and in law, the CIT(A) has erred by not following the principle of natural justice in respect of consideration of the retraction of statement u/s 132(4) of the Act, of Shri Rajendra Jain without giving an opportunity to the AO of being heard, though statement of Shri Dharmichand Jain, Director of M/s Mazniprabha Impex Pvt. Ltd. and Shri Nitin Jogad, Proprietor of M/s Nayan Gems are relevant apart from Shri Rajendra Jain." 3 "That on the facts & circumstances of the case and in law, the CIT(A) has erred in allowing relief to the assessee company without appreciating the facts that the AO in course of assessment has fulfilled the conditions laid I.T.A Nos.591,592&593/Kol/2021 Assessment years: 2007-08, 2011-12 & 2012-13 M/s Shreejee Jewellers Pvt. Ltd. 12 down by the Hon'ble Supreme Court in the case of GKN Driveshaft (India) Ltd. (supra)." 4 "That the appellant craves leave to add to and/or alter, amend, modify or rescind the grounds hereinabove before or hearing of this appeal." 8. Both the ld. representatives of the parties have submitted that the facts and issues involved in this appeal are identical to that of ITA No.591/Kol/2021 for assessment year 2007-08. We further note from the impugned order that the ld. CIT(A) has duly taken note of the evidence furnished by the assessee of the related parties from whom the purchases were made such as copy of invoices, company master data as per MCA site reflecting the registered address, acknowledgement of filing Income Tax Return for assessment year 2012-13, copy of PAN card of the parties and confirmations from the respective parties. The ld. CIT(A) has further noted as under: 5.3 The appellant had furnished the summary of diamonds movement for the period 1.4.2006 to 31.3.2007 indicating the quantity and value in opening balance, purchases, sales and closing balance (enclosed in page 53 of paper book). The appellant had also filed the purchase bills of M/s. Vitrag Jewels (enclosed in pages 68 to 72 of the paper book) together with the ledger account of M/s. Vitrag Jewels as appearing in the books of the assessee firm for the period 1.4.2006 to 31.3.2007 and for the period 1.4.2007 to 31.3.2008 wherein the payments were made to M/s. Vitrag Jewels by account payee cheques. Admittedly the payments were made to M/s. Vitrag Jewels through account payee cheques on 22.2.2008 (Rs.10,00,000/-) and on 27.3.2008 (Rs.5,57,470/-). Hence the primary allegation of the AO that the ATA No. 1/Koi/2017 M/s. M. B. Jewellers & Sons A. Yr. 2007-08 assessee had received the cash back in lieu of account payee cheques issued from M/s Vitrag Jewels (based on the statement of Shri Rajendra Jain) and used the said cash for purchasing diamonds from unknown parties in the grey market. Gets defeated on this count also, in as much as the AO had accepted the fact that factum of purchases of diamonds indeed has been made by the assessee in the Asst Year 2007-08 (i.e. the year under appeal) and whereas the payments were made to Vitrag Jewels only in next Asst Year i.e. AY 2008-09. While this is so, it is highly impossible for M/s. Vitrag Jewels to first hand over the cash even without receiving the cheques from the assessee. Hence no I.T.A Nos.591,592&593/Kol/2021 Assessment years: 2007-08, 2011-12 & 2012-13 M/s Shreejee Jewellers Pvt. Ltd. 13 cash could be available with the assessee to make purchase of diamonds from unknown parties in the gray market in Asst Year 2007-08. Hence, the allegation of the AO only leads to impossible situation. 5.4 As per the P/L account of the appellant company shows that it has domestic sale of Rs.39,63,45,312.78/- and export sale of Rs.24,91,075.00/- and has filed return of income of Rs.28,83,968/-. The appellant has maintained complete details of bills and vouchers. The books of account of the appellant company have been duly audited and appellant is maintaining quantity wise details of purchases, sale and opening and closing stock. It is also relevant note that in the case of M/s M.B. Jeweller and Sons vs. DCIT, Circke-44, Kolkata that the Hon’ble ITAT observed that Sri Rajendra Jain had subsequently retracted his statement by way of an affidavit deposing before the Notary Public on 09.01.2014. Therein in the Hon’ble ITAT has adjudicated that it is highly impossible for M/s. Vitrag Jewels to first hand over the cash even without receiving the cheques from the assessee. Hence, no Cash could be available with the assessee to make purchase of diamonds from unknown parties in the gray market in Asstt. Year 2007-08. Hence, the allegation of the AO only leads to impossible situation. Keeping in view of the above mentioned facts and circumstances and the Judicial pronouncement of the Hon'ble ITAT in the case of M/s M.B. Jeweller & sons vs. DCIT, Circle-44 Kolkata (ITA No.1/Kol/2017), Hon'ble Jurisdictional High Court in the case of CAT vs. Alpha Hydronics Pvt. Ltd in ITA No. 549 of 2004 dated 10.11.2014 wherein the facts are identical and similar to this appeal and in the case of appellant for the A.Y. 2009- 10 wherein Hon'ble CIT(A)-15,Kolkata has granted full relief. Hence, it is my opinion that the addition made by the AO of Rs.1,49,89,050/- is not correct and I therefore delete the addition of Rs.1.49,89,050/- and the grounds of appeal 1 to 4 is allowed.” 9. After hearing the ld. representatives of parties, we do not find any reason to interfere in the above order of the CIT(A) and the same is upheld. 10. ITA No.593/Kol/2021 for assessment year 2012-13 – The Revenue in this appeal has taken the following grounds of appeal: “1. "That on the facts & circumstances of the case and in law, the CIT(A) has erred in deleting the addition made u/s 68 of the act for Rs.1.30 Crore and interest on the alleged unsecured loan of Rs.7,18,357/- I.T.A Nos.591,592&593/Kol/2021 Assessment years: 2007-08, 2011-12 & 2012-13 M/s Shreejee Jewellers Pvt. Ltd. 14 ignoring the ratio laid down in the case of CIT -vs- PRECISION FINANCE PVT. LTD. 208 ITR 465 (CAL), CIT -vs- UNITED COMMERCIAL AND INDUSTRIAL Co. (P) Ltd. 1871TR 596 (CAL); CIT -VS- BIJU PATNAIK 160 ITR 674 (SC) and in the case of NRA Iron & Steel Pvt Ltd (SC)." 2. That on the facts & circumstances of the case, the CIT(A) has erred in law by allowing appeal of the assessee company in respect of the addition made on account of bogus purchase without appreciating the facts that the assessee failed to prove one or two conditions out of three principal criteria laid down by High courts and by Supreme Court in number of cases including in the case NRA Iron & Steel Pvt Ltd, i.e. identity & creditworthiness of the creditors and genuineness of the transactions." 3. "That on the facts & circumstances of the case and in law, the CIT(A) has erred by not following the principle of natural justice in respect of consideration of the retraction of statement u/s 132(4) of the act of Shri Rajendra Jain without giving an opportunity to the A0 of being heard, though statement of Shri Dharmichand Jain, Director of M/s Mazniprabha Impex Pvt. Ltd. and Shri Nitin Jogad Proprietor of M/s Nayan Gems are relevant apart from Shri Rajendra jain." 4. "That on the facts & circumstances of the case and in law, the CIT(A) has erred in allowing relief to the assessee company on account of bogus purchase when Directorate of Investigation found certain documents during the course of search operation u/s 132 of the act in the premises of related persons and found that the claim of genuine purchase was factually accommodation entries." 5 "That on the facts & circumstances of the case and in law the CIT(A) has erred to hold that without doubting the sales disclosed in the books purchase cannot be held fictitious though, unproven limbs of such transactions showed clearly lead to ingenuine" 6. “That the appellant craves leave to add to and/or alter, amend, modify or rescind the grounds hereinabove before or at the time of hearing of this appeal.” 11. Both the ld. representatives of the parties have submitted that the issue raised by the Ground Nos.2&3 are related to the bogus purchases and that the facts and issues being identical as discussed above being adjudicated by ITA Nos.591&592/Kol/2021, the finding arrived therein will mutatis mutandis apply to this issue also. We have further note from I.T.A Nos.591,592&593/Kol/2021 Assessment years: 2007-08, 2011-12 & 2012-13 M/s Shreejee Jewellers Pvt. Ltd. 15 the impugned order of the CIT(A) that the ld. CIT(A) has categorically discussed the evidences furnished by the assessee in respect of each of the party and has recorded that the assessee was maintaining proper books of accounts including all details such as stock register, bills and vouchers in respect of manufactured and traded goods and further that the assessee had furnished details of purchases together with quantity rate and value. The payments were made through banking channel. It is not the case of the Revenue that the assessee had made purchase out of his unaccounted money as the purchases were made through account payee cheque/banks. The sales also have not been doubted by the Assessing Officer. Even, as observed above, the diamond being of very particular quality, weight, clarity etc. and in the facts and circumstances of the case have also not been doubted to be the purchase from grey market. In view of this, we do not find any infirmity in the order of the ld. CIT(A) so as to the issue raised by the Ground No.2 & 3 in respect of bogus purchases is concerned. 12. Coming to the Ground No.1, the Revenue vide Ground No.1 has contested the action of the CIT(A) in deleting the additions made on unsecured loans and advances. We note that the ld. CIT(A) has given details of the documents furnished by the assessee in respect of each of the party and thereby has arrived at a conclusion that the assessee has duly established the identity and creditworthiness of the parties and genuineness of the transaction. Even the ld. CIT(A) has noted that subsequently the said loan has repaid by the assessee to the concerned parties. The relevant part of the order of the CIT(A) is reproduced as under: I.T.A Nos.591,592&593/Kol/2021 Assessment years: 2007-08, 2011-12 & 2012-13 M/s Shreejee Jewellers Pvt. Ltd. 16 “In terms of section 68 appellant was required to establish the 3 ingredients i.e. identity, genuineness and creditworthiness. From the documents places on record, it appeared and all the unsecured loan creditors had furnished/given the following documents to the appellant which are filed before me. 1. Shiv Shambhu Vincom Pvt. Ltd. 1. Ledger Copy of Shreejee Jewellers Pvt. Ltd. in the books of Shiv Shambhu Vincom Pvt. Ltd. for the period 01/04/2011 to 31/03/2012 2. Copy of bank statement of M/s Shiv Shambhu Vincom Pvt. Ltd. reflecting the relevant transactions. 3. Certificate from Shiv Shambhu Vincom Pvt. Ltd. declaring the source of fund. 4. Copy of Certificate of Incorporation 5. Copy of PAN card 6. Acknowledgement of filing Income Tax Return of Shiv Shambhu Vincom Pvt. Ltd. for the A.Y. 2012-13. 7. Copy of Audited Financial Statements of the Shiv Shambhu Vincom Pvt. Ltd. for the A.Y. 2012-13. 8. Copy of order u/s 143(1) for the A.Y. 2014-15 of Shiv Shambhu Vincom Pvt. Ltd. evidencing the same is being regularly assessed. 9. Ledger of M/s Shiv Shambhu Vincom Pvt. Ltd. in the books of M/s Shreejee Jewellers Pvt. Ltd. for the period 01/04/2011 to 31/03/2012 10. Copy of bank statements of M/s Shreejee Jewellers Pvt. Ltd. reflecting the relevant transactions. 1. Madhuban Vanijya Pvt. Ltd. 1. Ledger Copy of Shreejee Jewellers Pvt. Ltd. in the books of Madhuban Vanijya Pvt. Ltd. for the period 01/04/2011 to 31/03/2012 2. Copy of bank statement of Madhuban Vanijya Pvt. Ltd. reflecting the relevant transactions. 3. MCA Master data copy of Madhuban Vanijya Pvt. Ltd. 4. Copy of Form 18 filed by Madhuban Vanijya Pvt. Ltd. relecting change of address of the said company. 5. Copy of PAN card I.T.A Nos.591,592&593/Kol/2021 Assessment years: 2007-08, 2011-12 & 2012-13 M/s Shreejee Jewellers Pvt. Ltd. 17 6. Acknowledgement of filing Income Tax Return of Madhuban Vanijya Pvt. Ltd. for the A.Y. 2012-13. 7. Copy of Audited Financial Statements of the Madhuban Vanijya Pvt. Ltd. for the A.Y. 2012-13. 8. Ledger of Madhuban Vanijya Pvt. Ltd. in the books of M/s Shreejee Jewellers Pvt. Ltd. for the period 01/04/2011 to 31/03/2012 10. Copy of bank statements of M/s Shreejee Jewellers Pvt. Ltd. reflecting the relevant transactions. 1. Palak Mercantile Pvt. Ltd. 1) Copy of Loan Confirmation. 2) Ledger Copy of Shreejee Jewellers Pvt. Ltd. in the books of Palak Mercantile Pvt. Ltd. for the period 01/04/2011 to 31/03/2012. 3) Certificate from Palak Mercantile Pvt. Ltd. declaring the source of fund. 4) Copy of bank statement of Palak Mercantile Pvt. Ltd. reflecting the relevant transactions. 5) Copy of Form 18 filed Palak Mercantile Pvt. Ltd. reflecting change of address of the said company 6) Copy of PAN Card 7) Acknowledgement of filing income tax return of Palak Mercantile Pvt. Ltd. for the A.Y. 2012-13 8) Copy of order u/s 143(1) for the A.Y. 2012-13 of Palak Mercantile Pvt. Ltd. evidencing the same is being regularly assessed. 9) Copy of Audited Financial Statements of the Palak Mercantile Pvt. Ltd. for the A.Y. 2012-13. 10) Ledger of Palak Mercantile Pvt. Ltd.in the books of M/s Shreejee Jewellers Pvt. Ltd. for the period 01/04/2011 to 31/03/2012. 11) Copy of bank statements of M/s Shreejee Jewellers Pvt. Ltd. reflecting the relevant transactions. 1. Saraogi Vinimay Pvt. Ltd. 1) Copy of Loan Confirmation. 2) Ledger Copy of Shreejee Jewellers Pvt. Ltd. in the books of Saraogi Vinimay Pvt. Ltd. for the period 01/04/2011 to 31/03/2012. I.T.A Nos.591,592&593/Kol/2021 Assessment years: 2007-08, 2011-12 & 2012-13 M/s Shreejee Jewellers Pvt. Ltd. 18 3) Certificate from Saraogi Vinimay Pvt. Ltd. reflecting the relevant transactions. 4) Copy of trade licence reflecting address proof of Saraogi Vinimay Pvt. Ltd. 5) Copy of PAN Card 6) Acknowledgement of filing income tax return of Saraogi Vinimay Pvt. Ltd. for the A.Y. 2012-13 7) Copy of Audited Financial Statements of the Saraogi Vinimay Pvt. Ltd. for the A.Y. 2012-13. 8) Ledger of Saraogi Vinimay Pvt. Ltd. in the books of M/s Shreejee Jewellers Pvt. Ltd. for the period 01/04/2011 to 31/03/2012. 9) Copy of bank statements of M/s Shreejee Jewellers Pvt. Ltd. reflecting the relevant transactions. 1. Nightingle Merchants Pvt. Ltd. a) Copy of Loan Confirmation. b) Ledger Copy of Shreejee Jewellers Pvt. Ltd. in the books of Nightingle Merchants Pvt. Ltd. for the period 01/04/2011 to 31/03/2012. c) Certificate from Nightingle Merchants Pvt. Ltd. declaring the source of fund. d) Copy of bank statement of M/s Nightingle Merchants Pvt. Ltd. reflecting the relevant transactions. e) Copy of Trade Licence reflecting address proof of Nightingle Merchants Pvt Ltd. f) Copy of PAN Card g) Acknowledgement of filing income tax return of Nightingle Merchants Pvt. Ltd. for the A.Y. 2012-13 h) Copy of order u/s 143(1) for the A.Y. 2012-13 of Nightingle Merchants Pvt Ltd. evidencing the same is being regularly assessed. i) Copy of Audited Financial Statements of the Nightingle Merchants Pvt. Ltd for the A.Y. 2012-13. j) Ledger of M/s Nightingle Merchants Pvt. Ltd. in the books of M/s Shreejee Jewellers Pvt. Ltd. for the period 01/04/2011 to 31/03/2012. k) Copy of bank statements of M/s Shreejee Jewellers Pvt. Ltd. reflecting the relevant transactions. I.T.A Nos.591,592&593/Kol/2021 Assessment years: 2007-08, 2011-12 & 2012-13 M/s Shreejee Jewellers Pvt. Ltd. 19 Appellant had discharged initial onus by providing identity of all creditors by giving their complete addresses, PAN and copies of acknowledgement for filing of I.T. Returns, confirmation and bank statement. Appellant had also proved capacity of creditors by showing that amounts were received by account payee cheques drawn from bank accounts of creditors. Repayment of loan and interest thereon was also made by account payee cheques by the appellant and tax also had been deducted at sources on interest payments and remitted. Merely because summons issued to some of creditors could not be served or they failed to appear before A.O could not be ground to treat those credits as non-genuine. The similar views were held in the case of CIT v. U.M. shah, proprietor, Shrenik Trading Co. [1973] 90 ITR 396,397(Bom) and in the case of Rohini Builders v. Dy. CIT [2002] 76 TTJ (Ahd.) 521/[2011] 117 Taxman 26(Mag). The ratio of Rohini Builders case (supra) was also relied upon the following cases: 1. Mohar Singh v. Dy. CIT[2002]77 TTJ(Agra)218 2. Dy. CIT v. Sahara India Financial Corpn. Ltd. [2003] 81 TTJ(Lucknow) 389. 3. ITO v. Matadin Snehlata (HUF) [2003]81 TTJ (AII.) 995. 4. Jagadamba Construction Co. v. ITO [2004] 3 SOT 670 (Jodh.) 5. Sumak Powercap Ltd. v. Asstt. CIT [2005] 90 TTJ (Lucknow) 420 The appellant relied upon on various court cases mentioned in its submission. Moreover I also observed in the assessment order that the AO himself contradicting his finding on the facts mentioned in the assessment order, I am unable to accept AO's conclusions that loan creditors cannot be found at their respective address, the loan received from them is also considered to be bogus and repayment is not relevant. I am of the considered view that the appellant proved the identify, genuineness and credit worthiness of all the loan creditors, and therefore on 3 touchstones incorporated in section 68 of the I. T. Act, the addition of Rs. 1,30,00,000/- and Rs.7,18,357/- (on account of interest paid to the unsecured loan creditors) were not justified. The additions are accordingly deleted and ground no. 2 and ground no.3 are allowed.” 13. Since the ld. CIT(A) has not only discussed in details the various evidences proving the identity, creditworthiness of the parties and genuineness of the transaction but also the fact that assessee has I.T.A Nos.591,592&593/Kol/2021 Assessment years: 2007-08, 2011-12 & 2012-13 M/s Shreejee Jewellers Pvt. Ltd. 20 subsequently repaid the loan amount to the concerned parties and TDS was also deducted on the interest paid to the parties on such loan amount. In view of this, we do not find any reason to interfere with the order of the CIT(A) on the above issue also. This ground of the Revenue is also dismissed. 14. Vide Ground No.4, the Revenue has agitated the action of CIT(A) in deleting the addition of Rs.2,42,83,488/-. At the outset, the ld. counsel for the assessee has submitted that the investments were made by the assessee not for the purpose of earning of exempt income, rather the investment, in question, was made in immovable property, therefore, the provisions of section 14A were not attracted. The ld. CIT(A), therefore, rightly deleted the addition in respect of disallowance made by the Assessing Officer in relation to the investment in immovable property. Therefore, there is no merit in this ground of the Revenue and the same is accordingly dismissed. 15. In the result, all the three appeals of the Revenue stand dismissed. Kolkata, the 24 th November, 2022. Sd/- Sd/- [डॉÈटर मनीष बोरड /Dr. Manish Borad] [संजय गग[ /Sanjay Garg] लेखा सदèय /Accountant Member ÛयाǓयक सदèय /Judicial Member Dated: 24.11.2022. RS Copy of the order forwarded to: 1. DCIT, Circle-7(1), Kolkata 2. M/s Shreejee Jewellers Pvt. Ltd. 3. CIT(A)- 4. CIT- , I.T.A Nos.591,592&593/Kol/2021 Assessment years: 2007-08, 2011-12 & 2012-13 M/s Shreejee Jewellers Pvt. Ltd. 21 5. CIT(DR), //True copy// By order Assistant Registrar, Kolkata Benches