M/s. Shri Ram Hari Ram & Sons Pvt. Ltd., New Delhi V. ACIT, New Delhi

ITA 5954/DEL/2014

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 5565 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 5 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-04-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Assessment Year: 2008-2009
• Appeal Filed On: 03-11-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S S RANA
• Assessee Lawyers: ASHISH CHADHA
• Keywords: Bogus purchase; Unexplained cash credit; Unexplained investment; Search and seizure; Principle of natural justice; Opportunity of cross examination; Peak credit; Question of law; Accommodation entries
• Section: 153A; 133(6); 131; 68; 69; 37; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH E , NEW DELHI BEFORE SH. N. K. SAINI, AM AND SMT. SUCHITRA KAMBLE , JM ITA NO. 5954/DEL/2014 : ASSTT. YEAR : 2008 - 09 SHRI RAM HARI RAM & SONS PVT. LTD., A - 22, GREEN PARK, NEW DELHI VS ACIT, CENTRAL CIRCLE - 2, NEW DELHI (APPELLANT) (RESPONDENT) PAN NO. A A BCS6865P ASSESSEE BY : SH. VED JAIN, ADV. & SH. ASHISH CHADHA, CA REVENUE BY : SH. S. S. RANA , CIT DR DATE OF HEARING : 16 .0 1 .201 8 DATE OF PRONOUNCE MENT : 13 .0 4 .201 8 ORDER PER N. K. SAINI, AM : THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE ORDER DATED 05.09 .2014 OF LD. CIT(A ) - I II , NEW DELHI. 2. FOLLOWING GROUNDS HAVE BEEN RAISED IN THIS APPEAL: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE ORDER PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) [CIT(A)] IS BAD BOTH IN THE EYE OF LAW AND ON FACTS. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CAS E, THE LEARNED CIT(A) HAS ERRED BOTH ON FACTS AND IN LAW IN REJECTING THE CONTENTION OF THE ASSESSEE THAT THE PROCEEDINGS INITIATED UNDER SECTION 153A AGAINST THE APPELLANT ARE IN VIOLATION OF THE STATUTORY CONDITIONS AND THE PROCEDURE PRESCRIBED UNDER THE LAW AND AS SUCH THE SAME IS BAD IN LAW AND LIKELY TO BE QUASHED. ITA NO . 5954 /DE L/2014 SHRI RAM HARI RAM & SONS PVT. LTD . 2 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED BOTH ON FACTS AND IN LAW IN REJECTING THE CONTENTION OF THE ASSESSEE THAT THE NOTICE ISSUED UNDER SECTION 153A BY THE AO IS IN VIOLATION OF THE PROVISIONS OF THE ACT AND AS SUCH THE ASSESSMENT FRAMED IN CONSEQUENCE THEREOF IS BAD. 4. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED BOTH ON FACTS AND IN LAW IN CONFIRMING THE VARIOUS ADDITIONS I N PROCEEDINGS UNDER SECTION 153A OF THE ACT MADE BY THE AO. 5(I) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED BOTH ON FACTS AND IN LAW IN CONFIRMING THE ADDITION OF RS.39,24,981/ - MADE BY THE AO BY HOLDING THAT THE PURCHASE EXP ENSES CLAIMED BY THE ASSESSEE ARE ON ACCOUNT OF UNEXPLAINED INVESTMENT UNDER SECTION 69 OF THE INCOME TAX ACT. (II) THAT THE ABOVE SAID ADDITION HAD BEEN MADE DESPITE THE ASSESSEE BRINGING ALL MATERIAL AND EVIDENCES ON RECORD TO PROVE THE PURCHASES. 6(I) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED BOTH ON FACTS AND IN LAW IN CONFIRMING THE ADDITION DESPITE THE FACT THAT THE SAME HAS BEEN MADE ON THE BASIS OF MATERIAL COLLECTED AT THE BACK OF THE ASSESSEE WITHOUT GIVING IT AN O PPORTUNITY TO REBUT THE SAME IN CLEAR VIOLATION OF THE PROVISIONS OF SECTION 142(3) OF THE ACT. (II) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED BOTH ON FACTS AND IN LAW IN CONFIRMING THE ADDITION DESPITE THE FACT THAT THE SAM E HAS BEEN MADE ON THE BASIS OF STATEMENT OF CERTAIN PERSONS RECORDED ON OATH WITHOUT GIVING ASSESSEE AN OPPORTUNITY TO CROSS - EXAMINE THE SAME IN CLEAR VIOLATION OF THE PRINCIPLES OF NATURAL JUSTICE. ITA NO . 5954 /DE L/2014 SHRI RAM HARI RAM & SONS PVT. LTD . 3 7. THE APPELLANT CRAVE S LEAVE TO ADD, AMEND OR ALTER A N Y OF THE GROUNDS OF APPEAL. 3. THE ONLY GRIEVANCE OF THE ASSESSEE IN THIS APPEAL RELATES TO THE CONFIRMATION OF ADDITION OF RS.39,24,981/ - MADE BY THE AO WHILE FRAMING THE ASSESSMENT U/S 153A OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE AC T). 4. FACTS OF THE CASE IN BRIEF ARE THAT A SEARCH AND SEIZURE OPERATION U/S 132 OF THE ACT WAS CARRIED OUT ON 26.02.2009 AT THE PREMISES OF THE ASSESSEE. CONSEQUENTLY, A NOTICE U/S 153A OF THE ACT WAS SERVED UPON THE ASSESSEE. IN RESPONSE, THE ASSESSEE FILED THE RETURN OF INCOME ON 23.03.2010 , DECLARING AN INCOME OF RS. 1,31,28,296/ - , WHICH WAS THE SAME AS WAS IN THE ORIGINAL RETURN OF INCOME U/S 139(1) OF THE ACT FILED ON 14.10.2009. THE AO OBSERVED THAT DURING THE COURSE OF PRE - SEARCH INVESTIGATION , INF ORMATION WAS RECEIVED FROM THE CIB UNIT OF JAIPUR IN RESPECT OF CERTAIN ACCOMMODATION BILLS WHICH HAD BEEN PROCURED BY THE ASSESSEE. THE AO CONFRONTED THE ASSESSEE WITH THE BILLS AND ASKED TO SUBMIT THE EXPLANATION, CONFIRMATION, COPY OF ITR, BANK STATEMEN T OF THOSE PARTIES AND THE AMOUNT OF TRANSACTION WITH THOSE PARTIES. IN RESPONSE, THE ASSESSEE FURNISHED THE CONFIRMATION OF THE PARTIES. THE AO AGAIN ASKED THE ASSESSEE TO EXPLAIN, AS UNDER: 'DURING THE PERIOD MENTIONED ABOVE, FOLLOWING PURCHASES H AS BEEN SHOWN TO HAVE BEEN MADE : S. NO. NAME OF ASSESSEE NAME OF PARTY WHO ISSUED BILLS BILL NO. DATE AMOUNT 1 SHRI RAM HARI RAM & SONS PVT . LTD. M/S ANIL EXPORTS 135 26.11.2007 2,76,400 ITA NO . 5954 /DE L/2014 SHRI RAM HARI RAM & SONS PVT. LTD . 4 2 SHRI RAM HARI RAM & SONS PVT. LTD. M/S ROHIT G EMS 3 SHRI RAM HARI RAM & SONS PVT. LTD. SILVER N SILVER 3,00,000 DURING THE ASSESSMENT PROCEEDINGS, CONFIRMATIONS FROM THE ABOVE PARTIES HAVE BEEN SUBMITTED. HOWEVER, THE SAME ARE QUIET OLD. HOWEVER, THE ABOVE MENTIONED SUPPLIERS H AVE DENIED SUPPLY OF GOODS TO YOU. IT IS FOUND THAT THESE SUPPLIER PARTIES ARE MERELY ENTRY PROVIDERS. IN THE GIVEN CIRCUMSTANCES, IT IS FOUND THAT YOU ARE CLAIMING EXPENSES OF PURCHASES FROM ENTRY PROVIDERS. IN VIEW OF THE FACTS, AS MENTIONED ABOVE, YOU A RE REQUESTED TO SHOW CAUSE AS TO WHY THE PURCHASE EXPENSES CLAIMED BY YOU SHOULD NOT BE DISALLOWED. IT IS FURTHER INFORMED THAT ALL THE CLAIM MADE BY YOU MUST BE SUBSTANTIATED BY EVIDENCE AND PRODUCE PERSONS RELATED THE TRANSACTION, VISIT, VALUATION, TRANS PORTATION, PACKING AND ALL RELATED ACTIVITIES. 5. IN RESPONSE, THE ASSESSEE FURNISHED THE CONFIRMATION FROM THE AFORESAID PARTIES OF LATEST DATES AND HAD MENTIONED THE AMOUNT TRANSACTION BEFORE THE NAME OF THE PARTIES. THE AO WAS NOT SATISFIED FROM THE REPLY OF THE ASSESSEE AND OBSERVED THAT THOSE CONFIRMATION S HAD BEEN FURNISHED BY THE ASSESSEE BY CHANGING THE DATE AFTER APPLYING WHITENER , SO, IT WAS NOT POSSIBLE TO RELY ON THE ASSESSEE. THE AO ALSO OBSERVED THAT AS PER THE REPORT, THE AFORESAID PARTIES WERE ONLY ENTRY OPERATOR I.E. THEY WERE ENGAGED IS ONLY TRANSACTION BILLS AND NO T TRANSACTION OF MATERIAL. THE AO ASKED THE ASSESSEE TO FURNISH EXPLANATION WITH REGARD TO THE STATEMENT OF THOSE PERSONS AND TO FURNISH DOCUMENTARY EVIDENCES IN RESPECT OF TH E CLAIM. IN RESPONSE, THE ASSESSEE SUBMITTED AS UNDER: ITA NO . 5954 /DE L/2014 SHRI RAM HARI RAM & SONS PVT. LTD . 5 'IN THIS RE SPECT, IT IS SUBMITTED AS UNDER : - AS PER ABOVE MENTIONED STATEMENT, NO SPECIFIC REFERENCE ABOVE THE TRANSACTIONS WITH THE ASSESSEE FIRM HAS BEEN GIVEN. - THAT THE ASSESSEE FIRM HAS DULY ACC OUNTED FOR ALL TRANSACTIONS ENTERED INTO WITH ABOVE FIRMS AND DETAILED REPLY FOR THE SAME (PARTY - WISE) HAS BEEN FILED . - REGARDING PRESENT ADDRESS OF M/S ROHIT GEMS, IT IS SUBMITTED AS UNDER: THAT AS PER PURCHASE INVOICES RAISED BY M/S ROHIT GEMS, FOLLOWI NG IS THE ADDRESS MENTIONED: 2088, HALDIYON KA RASTA, JOHRI BAZAR, JAIPUR THE ASSESSES COMPANY HAS NOT MADE PURCHASES FROM M/S ROHIT GEMS FOR LAST OVER ONE AND HALF YEAR APPROX., THEREFORE, IF THE PARTY IS NOT AVAILABLE AT ABOVE ADDRESS, THE ASSESSEE IS UNABLE TO PROVIDE ANY FURTHER / LATEST ADDRESS OF THE PARTY. IN VIEW OF ABOVE SUBMISSIONS, IT IS CLEAR THAT NO ADVERSE INFERENCE CAN BE DRAWN REGARDING THE TRANSACTIONS WITH THE ASSESSEE COMPANY, AS THERE IS NO MENTION OF ASSESSEE'S NAME IN THE STATEMENT FORWARDED BY YOUR GOODSELF.' 6. HOWEVER, THE AO WAS NOT SATISFIED FROM THE SUBMISSIONS OF THE ASSESSEE AND MADE THE ADDITION OF RS.39,24,981/ - BY OBSERVING IN PARAS 4.4 TO 4.6 OF THE ASSESSMENT ORDER DATED 21.12.2010 , AS UNDER: 4.4 THE ASSESSEE'S REPLY HAS BEEN CONSIDERED AND IT IS CLEAR THAT THE ASSESSEE'S REPLY IS GENERAL IN NATURE AND HAS NO FORCE FOR THE REASON THAT THE ASSESSEE HAS GIVEN TWO REPLIES WHICH ARE CONTRADICTORY ITSELF. VIDE REPLY DATED 26.11.2010, THE ASSESSEE HAS GIVEN FRESH AS ON ITA NO . 5954 /DE L/2014 SHRI RAM HARI RAM & SONS PVT. LTD . 6 DATE CONFIRMATION OF ALL THE THREE PARTIES, WHEREAS VIDE REPLY DATED 16.12.2010, THE ASSESSEE HAS SUBMITTED THAT IT COULD NOT FURNISH NEW ADDRESS OF M/S ROHIT GEMS, AS NO TRANSACTION HAS TAKEN PLACE IN NEAR PAST. THIS REPLY OF THE ASSESSEE REVEALS THAT THE ASSE SSEE COULD NOT SUBSTANTIATE ITS REPLY AND HAS SUBMITTED A GENERAL REPLY IN ORDER TO DISCHARGE ITS ONUS. FURTHER, IN THE CASE OTHER TWO PARTIES, IT IS MENTIONED BY THE TWO PERSONS AND PROPRIETORS OF THE CONCERNS, IN THEIR RESPECTIVE STATEMENT, SH. ANIL KUMA R, PROP, OF M/S ANIL EXPORTS AND SH. SUBHASH CHAND JAIN, PROP, OF M/S SILVER N SILVER, THAT THEY ARE ENGAGED IN THE BUSINESS OF GIVING ENTRIES THROUGH THESE FIRMS BY MERELY CHARGING COMMISSION @ 10 PAISE TO 50 PAISE PER 100/ - RUPEES. AS FAR AS THE THIRD PA RTY, M/S ROHIT GEMS IS CONCERNED, IT IS SUBMITTED BY THE CIB, JAIPUR THAT THIS IS NOT TRACEABLE AT THE KNOWN ADDRESS AND THE TRANSACTIONS MADE WITH THIS PARTY MAY BE TREATED AS BOGUS PURCHASES AND SHALL BE TREATED AS ENTRY. 4.5 IN VIEW OF ABOVE FACTS AND CIRCUMSTANCES OF THE CASE, IT IS CLEAR THAT THE THREE PARTIES WITH WHOM, THE ASSESSEE HAS SHOWN TRANSACTIONS ARE NOTHING BUT MERELY ENTRY OPERATORS AND AT A MEAGER AMOUNT OF COMMISSION, THEY CONVERT THE MONEY INTO BUSINESS TRANSACTION, AND ALSO IN THE LIGH T OF ABOVE FACTS, IT IS CLEAR THAT THE ASSESSEE CANNOT SUBSTANTIATE ITS CLAIM OF PURCHASE EXPENSES FROM THE ABOVE PARTIES AND IT ONLY CORROBORATE THE OBSERVATION MADE IN PRECEDING PARAGRAPH 4.1 ABOVE THAT THE CONFIRMATIONS HAVE BEEN FILED BY THE ASSESSEE A RE NOTHING BUT MISLEADING DOCUMENT WHICH HAS BEEN SUBMITTED BY IT BY MERELY CHANGING THE DATE AFTER APPLYING THE WHITNER AND NO NEW CONFIRMATIONS HAVE BEEN SIGNED . 4.6 HENCE , THE PURCHASE EXPENSES CLAIMED BY THE ASSESSEE TO THE TUNE OF RS. 39,24,981/ - ARE NOTHING BUT UNEXPLAINED INVESTMENT MADE BY THE ASSESSEE U/S 69 OF THE I.T. ACT, 1961. THE SAME IS, THEREFORE, ADDED TO THE TOTAL INCOME OF THE ASSESSEE. ITA NO . 5954 /DE L/2014 SHRI RAM HARI RAM & SONS PVT. LTD . 7 7. BEING AGGRIEVED THE ASSESSEE CARRIED THE MATTER TO THE LD. CIT(A) AND SUBMITTED AS UNDER: ( A) ALL CONFIRMATIONS ARE DATED 1 ST APRIL 2008 , P LEASE NOTE THAT ASSESSEE HAS TAKEN OUT THE PRINTS OF TRANSACTIONS WITH SUPPLIERS OF MATERIAL UPTO 31.03.2008 (I.E. FOR THE PERIOD 01.04.2007 TO 31.03.2008) AND IN SUCH A SITUATION LEDGER ACCOUNT OF ALL SUPPLIERS WER E DATED 01.04.2008. IT DOES NOT MEAN THAT ALL SUPPLIERS HAS SIGNED THE CONFIRMATION ON 01.04.2008. (B) ASSESSEE SUBMITTED PARTY - WISE DETAILS OF ALL PURCHASES MADE DURING THE YEAR AND ALSO SUBMITTED CONFIRMATION INCLUDING PURCHASES CONSIDERED FOR ADDITION OF RS.39,24,981/ - U/S 69 OF IT ACT REGARDING PARA 4.1 IT IS SUBMITTED THAT IN THIS CASE ASSESSEE NEVER RESUBMITTED CONFIRMATIONS OF CONCERNED PARTIES BY CHANGING DATE FROM 1 ST APRIL 2008 TO ANY OTHER DATE. IN CASE AO STILL FELT THAT FRESH CONFIRMATIONS AR E NOT GENUINE HE SHOULD HAVE CALLED SUCH CONFIRMATION BY SERVING NOTICE U/S 133(6) OF IT ACT TO CONCERNED PARTIES. REGARDING PARA 4.2 AO GAVE COPY OF STATEMENT TAKEN ON OATH BY SOME OF THE SUPPLIERS CONSIDERED FOR THE PURPOSE OF ADDITION U/S 69 OF IT ACT . SUCH STATEMENT HAS BEEN RECORDED BY OFFICE OF DIT (INVESTIGATION) JAIPUR. STATEMENTS ARE GENERAL IN NATURE AND THERE IS NO SPECIFIC MENTION OF THE ASSESSEE NAME. THE ASSESSEE HAS POINTED OUT TO AO THIS FACT IN REPLY DATED 16.12.2010 . IT IS PERTINENT TO N OTE THAT ASSESSEE HAS NOT BEEN GIVEN AN OPPORTUNITY TO CROSS EXAMINE SUCH PARTIES AND SAME IS IN CLEAR VIOLATION OF PRINCIPALS OF NATURAL JUSTICE. REGARDING PARA 4.3 REPLY OF THE ASSESSEE DATED 16.12.2010 HAS BEEN REPRODUCED WHICH CONFIRMS THE STAND OF T HE ASSESSEE AS DISCUSSED ABOVE. ITA NO . 5954 /DE L/2014 SHRI RAM HARI RAM & SONS PVT. LTD . 8 REGARDING PARA 4.4 AO COMMENT ON THE ASSESSEE REPLY DATED 16.12.2010. IT IS PERTINENT TO NOTE THAT EVEN CIB JAIPUR FAILED TO TRACE M/S ROHIT GEM AT THEIR AVAILABLE ADDRESS UNDER THE CIRCUMSTANCES ASSESSEE'S REPLY IS VALID. REGARDING PARA 4,5 AO'S IS OF THE OPINION THAT TRANSACTION WITH THREE CONCERNS ARE BOOK ENTRIES AND PURCHASES INVOICES HAS BEEN TAKEN BY ASSESSEE BY PAYING MERGER COMMISSION AND THAT ASSESSEE HAS FAILED TO SUBSTANTIATE ITS CLAIM. HOWEVER, AO HAS NOT REJE CTED THE BOOKS I.E . BOOKS OF ACCOUNTS HAS BEEN RELIED UPON BY AO. IT IS FURTHER SUBMITTED AS UNDER: IT IS FURTHER SUBMITTED THAT AO DID NOT EXERCISED AVAILABLE TOOL VIZ; TO CALL THE SUPPLIER TO FIND OUT WHETHER IT HAS SIGNED THE CONFIRMATION / FRESH CONF IRMATION OR NOT. - THAT AO HAS NOT REJECTED THE BOOKS OF THE ASSESSEE WHILE CONCLUDING THE DISALLOWANCE OF PURCHASE U/S 69 OF I. TAX ACT. IT CONFIRMS THAT AO HAS RELIED UPON THE BOOKS IN AS MUCH AS ALL PAYMENT OF PURCHASE CONSIDER U/S 69 OF I. TAX ACT HAS BEEN MADE BY ASSESSEE FROM ITS BANK ACCOUNT AND THAT STOCK RECORDS VIZ; QUANTITY COVERED UNDER THE RELEVANT PURCHASES BILLS HAVE BEEN ACCEPTED. - FOR COPY OF STOCK RECORDS - PAGE NO.27,69 TO 74 AND 83 TO 89 - ASSESSEE HAS FILED STOCK SUMMARY AS PER ANNEXURE - E TO 3CD REPORT GIVING QUANTITATIVE DETAILS OF OPENING STOCK, PURCHASES, SALES AND CLOSING STOCK. QUANTITY OF ALL PURCHASES INCLUDING ALLEGED BOGUS PURCHASES CONSIDERED U/S 69 OF INCOME TAX ACT FOR VALUE OF RS.39,24,981/ - HAS BEEN DULY ACCOUNTED FOR AND P ARTYWISE DETAILS WAS ALSO SUBMITTED AS DESIRED BY AO. ITA NO . 5954 /DE L/2014 SHRI RAM HARI RAM & SONS PVT. LTD . 9 - ITEM PRODUCED OUT OF ALLEGED PURCHASES CONSIDERED U/S 69 OF INCOME TAX ACT, HAS BEEN USED TO MANUFACTURE JEWELLERY SOLD. THE AO HAS MADE FOLLOWING CONCLUDING REMARKS WHILE MAKING ADDITION 'HENCE , THE PURCHASE EXPENSES CLAIMED BY THE ASSESSEE TO THE TUNE OF RS.39,24,981/ - ARE NOTHING BUT UNEXPLAINED INVESTMENT MADE BY THE ASSESSEE U/S 69 OF I. TAX ACT. THE SAME IS THEREFORE ADDED TO THE TOTAL INCOME OF THE ASSESSEE.' IT IS PERTINENT TO NOTE THAT IN THE ABSENCE OF RECEIPT OF QUANTITY IN STOCK RECORD OF CONCERNED PURCHASE BILLS (ALLEGED BOGUS PURCHASES), SALES ACCOUNTED CANNOT TALLY. THUS, ADDITION OF RS. 39,24,981/ - A LSO DO NOT STA ND THE TEST OF NORMAL ACCOUNTING AND APPLICABLE LEGAL PROVISION OF T HE I TAX ACT. IT IS ALSO PERTINENT TO NOTE THAT ASSESSEE HAS MADE PURCHASES FROM PARTIES DURING THE CURRENT YEAR INCLUDING ALLEGED BOGUS PARTIES AND APPLICABLE SALES TAX VIZ; VAT/CST/COMPOSITION TAX SCHEME ETC. HAVE BEEN GIVEN ON THE PURCHASE BILLS. COPIE S OF BILLS ENCLOSED INDICATE THE SAME. THE ASSESSEE CASE IS SQUARELY CO VERED BY ITAT JUDGEMENT VIDE ITA NO. 171 6/DEL/11 DT. 30.11.2011 SH. PRADEEP KUMAR JAIN HUF VS: /TO WARD 30(2), NEW DELHI. IN THIS CASE ASSESSEE WAS GIVEN RELIEF WITH FOLLOWING CONCLUDI NG REMARKS. IT WAS HELD THAT STATEMENT RECORDED BY INVESTIGATION CELL CAN BE STARTED POINT OF INVESTIGATION BUT CANNOT BE A CONCLUSIVE EVIDENCE TO DISBELIEVE THE PURCHASES MADE BY THE ASSESSEE. THE AO OUGHT TO HAVE COLLECTED MORE CORROBORATIVE EVIDENCE. AO CONCLUDED THE PROCEEDINGS WITHOUT CONDUCTING ENQUIRY AND SIMPLY RELIED UPON THE STATEMENT OF A PERSON RECORDED FROM THE BACK OF THE ASSESSEE AND ITA NO . 5954 /DE L/2014 SHRI RAM HARI RAM & SONS PVT. LTD . 10 DISALLOWED THE PURCHASES. AO HAS FAILED TO COLLECT CONCLUSIVE EVIDENCE ON RECORD TO SAY THAT PURCHASES WERE BOGUS. IN THE LIGHT OF ABOVE SUBMISSIONS YOUR GOODSELF WILL KINDLY CONCLUDE AS UNDER : - THAT ASSESSEE'S RECORDS HAS BEEN RELIED ON BY VAT DEPARTMENT AND EVEN AO HAS NOT POINTED OUT ANY DEFECT IN QUANTITATIVE RECORDS. - THAT AO HAS SOLELY REL IED ON THE STATEMENT OF ALLEGED BOGUS PARTIES FOR DISALLOWING PURCHASES U/S 69 OF I. TAX ACT AND FAILED TO COLLECT MORE CORROBORATIVE EVIDENCE AGAINST THE ASSESSEE EXCEPT THE RECORDED STATEMENTS, UNDER THE CIRCUMSTANCES, COURTS HAVE NOT HELD THE ACTION OF AO AS JUSTIFIED. - THAT ASSESSEE'S CASE IS SQUARELY COVERED BY THE JUDGEMENT OF DELHI I TAT IN THE CASE OF SH. PRADEEP KUMAR JAIN HUF VS /TO WARD 30(2), NEW DELHI. THE ASSESSEE HAS NOT BEEN GIVEN ANY OPPORTUNITY TO THE ASSESSEE TO CROSS EXAMINE ALLEGED BOG US PARTIES AND HAS MADE NO MENTION IN HIS REPLY THE REASON OF SUCH AN INACTION. THAT AO HAS MADE THE ADDITION UNDER SECTION 69 OF INCOME TAX ACT ON THE BASIS OF CERTAIN STATEMENT RECEIVED BY DIG (INVESTIGATION), JAIPUR WHEREIN THERE IS NO SPECIFIC MENTION OF ASSESSEE'S NAME. THAT AO MADE NO ENQUIRY OF HIS OWN FROM ALLEGED BOGUS SUPPLIERS. SUCH ENQUIRY WAS ALSO NECESSARY PARTICULARLY WHEN THE ASSESSEE FILED CONFIRMATIONS OF ALL PARTIES FROM WHOM PURCHASES WERE MADE DURING THE CURRENT ASSESSMENT YEAR. THE P AYMENTS TO ALL PARTIES HAVE BEEN MADE BY ACCOUNT PAYEE CHEQUE / DEMAND DRAFT. ITA NO . 5954 /DE L/2014 SHRI RAM HARI RAM & SONS PVT. LTD . 11 THAT ASSESSEE HAS DULY ACCOUNTED FOR PURCHASES COVERED UNDER SECTION 69 OF INCOME TAX ACT BOTH IN THE FINANCIAL BOOKS AS WELL IN STOCK RECORDS. SUCH RECORDS HAS ALSO BEEN RELIED BY VARIOUS DEPARTMENT VIZ VAT. IT IS PERTINENT TO NOTE THAT WITHOUT TAKING INTO ACCOUNT QUANTITY OF ALL ITEMS PURCHASED, PRODUCTION ITEMS SOLD WAS NOT POSSIBLE. AO HAS THUS EXPRESSLY ACCEPTED BOOKS AND STOCK RECORDS OF THE ASSESSEE AND HAS ALSO RECONFIRME D THAT QUANTITY OF ALL PURCHASES (INCLUDING PURCHASES COVERED UNDER SECTION 69 OF INCOME TAX ACT) HAVE BEEN DULY RECORDED BOTH IN FINANCIAL BOOKS AS WELL AS IN STOCK RECORDS. IN THE LIGHT OF ABOVE SUBMISSIONS IT IS REQUESTED TO YOUR HONOUR TO DELETE THE A DDITION TO MEET THE END OF JUSTICE.....' 8. AFTER CONSIDERING THE AFORESAID SUBMISSIONS OF THE ASSESSEE, THE LD. CIT(A) DIRECTED THE AO TO AFFORD THE NECESSARY OPPORTUNITY TO THE ASSESSEE TO CROSS EXAMINE THE PROPRIETORS OF M/S ANIL EXPORTS AND M/S SILVER N. SILVER. IN ACCORDANCE TO THE ABOVE DIRECTIONS OF THE LD. CIT(A), THE AO ISSUED A COMMISSION U/S 131(1)(D) OF THE ACT TO ITO, WARD - 2(1), JAIPUR TO PROVIDE THE NECESSARY OPPORTUNITY TO THE ASSESSEE TO CROSS EXAMINE THE PROPRIETORS OF M/S ANIL EXPORTS AND M/S SILVER N. SILVER IN RESPECT OF PURCHASES MADE FROM THEM. THEREAFTER, THE ITO, WARD - 2(1), JAIPUR ISSUED SUMMONS U/S 131 OF THE ACT TO THE ASSESSEE TO APPEAR AND CROSS EXAMINE THE PROPRIETORS OF M/S ANIL EXPORTS AND M/S SILVER N. SILVER. THE ITO, WARD - 2 (1), JAIPUR REPORTED THA T THE ASSESSEE HAD NOT AVAILED THE OPPORTUNITY TO CR OSS EXAMINE THE PROPRIETORS OF M /S ANIL EXPORTS AND M/S SILVER N. SILVER . HE, THEREFORE, ISSUED A SHOW CAUSE AS TO WHY THE PURCHASES MADE FROM THOSE PARTIES BE NOT TREATED AS BOGUS . IN RESPONSE, THE ASSESSEE ITA NO . 5954 /DE L/2014 SHRI RAM HARI RAM & SONS PVT. LTD . 12 SUBMITTED THAT THE BOOKS OF ACCOUNTS WERE AUDITED, STOCK TALLY HAD BEEN MAINTAINED, VAT DEPARTMENT HAD NOT POINTED OUT ANY DEFECT , HENCE, THE PURCHASES WERE GENUINE. THE LD. CIT(A) , HOWEVER, CONFIRMED THE ADDITION MADE BY THE AO BY OBSERVING IN PARA 5.4 OF THE IMPUGNED ORDER AS UNDER: 5.4 THE APPELLANT'S VARIOUS CONTENTIONS HAVE DULY BEEN CONSIDERED AND IN MY HUMBLE VIEW, THE DECISION OF HON'BLE ITAT (DELHI) RELIED UPON BY THE APPELLANT IN THE CASE OF PRADEEP KUMAR, HUF (SUPRA) DOESN'T COME TO THEIR RESCUE BECAUSE IN THAT CASE THE EVIDENCE WAS COLLECTED AT THE BACK OF THE ASSESSEE BUT, HERE IN THE PRESENT CASE, DURING THE APPELLATE PROCEEDINGS, THE APPELLANT HAS BEEN PROVIDED THE DUE OPPORTUNITY TO CROSS EXAMINE NOT ONCE BUT TWIC E BY ITO, WARD - 2(L), JAIPUR (AS DISCUSSED ABOVE), HENCE THE APPELLANT'S RELIANCE ON THE ITAT'S JUDGEMENT IS TOTALLY MISPLACED. AS REGARDS, THE APPELLANT'S CONTENTION THAT VAT AND OTHER AUTHORITIES HAVE ACCEPTED THEIR BOOKS OF ACCOUNTS, IT IS STATED THAT TH E INVESTIGATION REPORTS ETC. WERE NOT AVAILABLE TO THOSE AUTHORITIES, HENCE THEIR ACCEPTANCE OF APPELLANT'S BOOKS RESULTS CANNOT BE TAKEN AS A SACROSANCT. THUS TAKING IN TOTALITY, ALL THE FACTS AND CIRCUMSTANCES AVAILABLE ON RECORD VIZ. FAILURE TO FILE TH E ITR OF THE SELLERS, THE BANK STATEMENT AND OTHER EVIDENCES ETC., BY THE APPELLANT TO PROVE THE GENUINENESS OF PURCHASES MADE FROM M/S. ROHIT GEMS, M/S ANIL EXPORTS AND M/S SILVER N. SILVER AND ALSO FAILURE TO CROSS EXAMINE THESE PARTIES ON THE APPELLANT' S OWN REQUESTS, PROVES BEYOND ANY IOTA OF DOUBT THAT THE PURCHASES MADE BY THE APPELLANT FROM THE ABOVE MENTIONED PARTIES ARE NOT GENUINE. HAVING SAID THAT, SINCE THE STOCK RECORDS ARE BEING MAINTAINED AND CORRESPONDING SALES HAVE BEEN MADE AND DULY RECORD ED IN BOOKS OF ACCOUNTS, THEREFORE, THE LOGICAL CONCLUSION THAT CAN BE DRAWN IS, THAT THE PURCHASES ARE MADE IN CASH OUTSIDE THE BOOKS OF ACCOUNTS BY THE APPELLANT FROM SOMEONE ELSE BUT THE ITA NO . 5954 /DE L/2014 SHRI RAM HARI RAM & SONS PVT. LTD . 13 ACCOMMODATION BILLS ARE BEING PROCURED FROM THE ABOVE MENTIONED 3 TAINTED PARTIES. HENCE, APPLYING THE THEORY OF PEAK CREDITS, SINCE ONLY ONE PURCHASE BILL IS BEING RAISED FROM THESE TAINTED 3 PARTIES, THEREFORE THE ADDITION OF AMOUNT OUTSTANDING AMOUNTING TO RS.39,24,981 (BEING THE OUTSTANDING PEAK CREDIT), NEEDS TO BE CONFIRMED. BEFORE PARTING WITH THIS ORDER, ANOTHER OBSERVATION WHICH IS QUITE PERTINENT, IS THAT BY ALL THESE TAINTED PARTIES THE CREDIT PERIOD ALLOWED IS ALSO UNUSUALLY LONG WHICH IS QUITE UNLIKELY IN THIS TRADE E.G. M/S ANIL EXPORTS ISSUED A BILL ON 13 T H AUGUST, 2007 (RS. 11,00,000) AND GOT PAYMENT ON 2 ND FEB.2008 (RS.10,00,000) AND 28.03.2008 (RS.1,00,000). SIMILARLY , M/S SILVER N. SILVER ISSUED SALE BILL ON 16.08.2007 (RS.20,44,981) BUT GOT PAYMENT ON 14.12.2007 (RS.3,00,000) AND 18.03.2008 (RS. 17,44, 981). THESE UNUSUAL LONG CREDIT PERIOD IS ALSO A POINTER TO THE FACT THAT ALL IS NOT WELL WITH THE AFFAIRS OF THE APPELLANT. HENCE, FROM THE ABOVE DISCUSSIONS, THE ADDITION OF RS.39,24,981 STANDS CONFIRMED. 9. NOW THE ASSESSEE IS IN APPEAL. THE LD. COUN SEL FOR THE ASSESSEE REITERATED THE SUBMISSION MADE BEFORE THE AUTHORITIES BELOW AND SUBMITTED THAT THE ASSESSEE HAD MADE THE PURCHASES FROM THREE PARTIES AND THIS FACT WAS ACCEPTED BY THE AO, A REFERENCE WAS MADE TO PARA 4.1 OF THE ASSESSMENT ORDER. IT WA S FURTHER SUBMITTED THAT THE AO MADE THE ADDITION U/S 69 OF THE ACT CONSIDERING THE PURCHASES AS UNEXPLAINED INVESTMENT IN SPITE OF THE FACT THAT THE SALES FROM THE SAID PURCHASES HAD BEEN ACCEPTED AND EVEN THE LD. CIT(A) ALSO ADMITTED THAT THE CREDIT PERI OD ALLOWED FOR THESE PURCHASES WAS UNUSUALLY LONG, A REFERENCE WAS MADE TO PAGE NOS. 11 & 12 OF THE IMPUGNED ORDER. THE LD. COUNSEL FOR THE ASSESSEE ALSO ITA NO . 5954 /DE L/2014 SHRI RAM HARI RAM & SONS PVT. LTD . 14 DREW OUR ATTENTION TOWARDS PAGE NOS. 62 TO 64 WHICH ARE THE COPIES OF THE INVOICES FROM M/S ROHIT GEMS , M/S ANIL EXPORTS AND M/S SILVER N. SILVER RESPECTIVELY AND SUBMITTED THAT THE COMPLETE DETAILS WERE GIVEN IN THOSE INVOICES RELATING TO THE PARTIES AND THAT THEIR TIN NUMBER & PAN NUMBER S WERE ALSO MENTIONED IN THOSE INVOICES. IT WAS STATED THAT THE ENTR IES OF PURCHASES WERE MADE IN THE STOCK REGISTER, A REFERENCE WAS MADE TO PAGE NO. 65 OF THE ASSESSEE S PAPER BOOK WHICH IS THE COPY OF THE QUANT ITATIVE DETAILS OF THE STOCK FOR THE PERIOD FROM 01.04.2007 TO 31.03.2008. IT WAS FURTHER STATED THAT THE DESCR IPTION OF THE ITEMS WERE ENTERED IN THE STOCK REGISTER (COPY OF WHICH IS PLACED AT PAGE NOS. 66 TO 71 OF THE ASSESSEE S PAPER BOOK ) AND THAT THE GOODS PURCHASED WERE SOLD ON 14.08.2007 WHICH WERE ACCEPTED AS GENUINE. THEREFORE, WHEN THE BOOKS WERE NOT REJE CTED AND THE PURCHASES WERE ENTERED IN THE STOCK REGISTER AND THE SALES WERE CONSIDERED TO BE GENUINE, T HE ADDITION ON ACCOUNT OF PURCHASES MADE BY THE AO AND SUSTAINED BY THE LD. CIT(A) WAS NOT JUSTIFIED. IT WAS SUBMITTED THAT IN SIMILAR CIRCUMSTANCES, TH E ADDITION WAS DELETED BY THIS BENCH OF THE ITAT IN THE CASE OF GROUP CONCERN I.E. ACIT, CENTRAL CIRCLE - 2, NEW DELHI VS M/S HARI DIAGEMS EXPORTS VS IN CO NO. 415/DEL/2012 VIDE ORDER DATED 31.07.2013 (COPY OF THE SAID ORDER WAS FURNISHED WHICH IS PLACED ON RECORD). 10. IN HIS RIVAL SUBMISSIONS, THE LD. CIT DR SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW AND FURTHER SUBMITTED THAT ALTHOUGH THE PARTIES FROM WHOM PURCHASES WERE MADE BY THE ASSESSEE WERE VERIFIABLE BUT THOSE PARTIES ADMITTED IN THEIR STATEMENT THAT THEY ITA NO . 5954 /DE L/2014 SHRI RAM HARI RAM & SONS PVT. LTD . 15 WERE PROVIDING ENTRIES ONLY . IT WAS ALSO STATED THAT ONE OF THE PARTY M/S ROHIT GEMS WAS NOT FOUND AT THE ADDRESS GIVEN BY THE ASSESSEE AND NO FRESH CONFIRMATION RELATING TO CHANGE OF ADDRESS, IF ANY, WAS PROVIDED BY THE ASSESSEE. IT WAS FURTHER SUBMITTED THAT ON THE DIRECTIONS OF THE LD. CIT(A), THE AO ISSUED THE SUMMONS TO THE PARTIES AND ALLOWED THE OPPORTUNITY TO CROSS EXAMINE BUT THE ASSESSEE DID NOT AVAIL THOSE OPPORTUNITY. THEREFORE, THE ADDITION MADE BY THE AO AND SUSTAINED BY THE LD. CIT (A) WAS FULLY JUSTIFIED. THE RELIANCE WAS PLACED ON THE FOLLOWING CASE LAWS: N K PROTEINS LTD. VS CIT (2017 - TIOL - 23 - SC - IT) CIT VS ARUN MALHOTRA (2014) 363 ITR 195 (DEL.) VIJAY PROTEINS LTD. VS ACIT (2015) 58 TAXMANN.COM 44 (GUJ.) CIT VS LA MEDICA (2001) 25 0 ITR 575 (DEL.) E.N. GOPAKUMAR VS CIT (2016) 75 TAXMANN.COM 215 (KERALA) CITVS RAJ KUMAR ARORA (2014) 367 ITR 517 (ALL.) 11. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND CAREFULLY GONE THROUGH THE MATERIAL AVAILABLE ON THE RECORD. IN THE PR ES ENT CASE, THE PARTIES FROM WHOM , THE ASSESSEE PURCHASED THE JEWELLERY AMOUNTING TO RS.39,2 4,981/ - WERE VERIFIABLE. THE AO, HOWEVER, MADE THE ADDITION ON THE BASIS OF TH E INFORMATION S RECEIVED FROM THE INVESTIGATION WING CAME TO THE CONCLUSION THAT THOSE PARTIES ADMITTED IN THEIR STATEMENT S THAT THEY WERE PROVIDING ACCOMMODATION ENTRIES. ON THE CONTRARY, THE ASSESSEE FURNISHED THE INVOICES OF THOSE PARTIES , THE PURCHASES WERE ENTERED IN THE STOCK REGISTER, THOSE ITEMS WERE SOLD BY THE ASSESSEE . THE AO ACCE PTED THE BOOKS OF ACCOUNTS MAINTAINED IN THE REGULAR COURSE OF BUSINESS AND ALSO NOT DOUBTED THE ENTRIES IN THE STOCK REGISTER. HE HAD ALSO ITA NO . 5954 /DE L/2014 SHRI RAM HARI RAM & SONS PVT. LTD . 16 ACCEPTED THE SALES FROM THESE PURCHASES, THEREFORE, THERE WAS NO OCCASION TO MAKE THE ADDITION ONLY ON THE BASIS OF THE ALLEGED STATEMENT S OF THE PARTIES GIVEN TO THE INVESTIGATION WING. AN IDENTICAL ISSUE HAVING SIMILAR FACTS HAS BEEN DECIDED BY THIS BENCH OF THE ITAT IN THE CASE OF ACIT, CENTRAL CIRCLE - 2, NEW DELHI VS M/S SHRI HARI DIAGEMS EXPORTS, NEW DELHI (SUPRA). IN THE SAID CASE ALSO, THE PURCHASES WERE MADE FROM THE SAME PARTIES WHICH ARE INVOLVED IN THE PRESENT CASE. THE RELEVANT FINDINGS HAVE BEEN GIVEN IN PARA 10 OF THE ORDER DATED 31.07.2013 IN ITA NO. 4978/DEL/2012 IN THE CASE OF ACIT, CENTRAL CIRCLE - 2, NEW DELHI VS M/S SHRI HARI DIAGEMS EXPORTS, NEW DELHI, WHICH READ AS UNDER: 10. WE HAVE HEARD BOTH THE SIDES. THE ADDITION OF UNEXPLAINED INVESTMENT U/S 69 OF THE INCOME - TAX ACT, 1961 HAS BEEN MADE ON THE BASIS OF THE REPORT RECEIVED FROM CIB, JAIPUR AS WELL AS DIT (INVESTIGATION), JAIPUR. THE ASSESSEE HAS SHOWN PURCHASES FROM M/S. POOJA JEWELLERS, M/S ANIL EXPORTS, M/S STONE IMPEX, M/S TOUCH STONE, M/S MAHAVIR GEMS, M/S VAISHALI GEMS, M/S KIRAN JEWELLERS AND M/S ROHIT GEMS. THE PROPRIETOR OF THESE CONCERNS DENIED SUPPLY OF GOODS IN THE STATEMENTS BEFORE CIB, JAIPUR AND DIT (INV.), JAIPUR. HOWEVER, THE ASSESSEE S NAME WAS NOT APPEARING IN THE STATEMENTS RECORDED BY THE DIT (INVESTIGATION), JAIPUR. WHEN THE ASSESSING OFFICER WAS ASKED FOR FRESH CONFIRMATION S FROM THESE SUPPLIERS IN ADDITION TO THE CONFIRMATIONS SUBMITTED EARLIER OCCASION, THE FRESH CONFIRMATIONS WERE FILED FROM THESE PARTIES. IN THE STATEMENTS RECORDED, THERE WAS NO SPECIFIC REFERENCE TO THE TRANSACTIONS ENTERED INTO BY THESE PERSONS WITH T HE ASSESSEE. FURTHER THE ASSESSEE WAS NEVER PROVIDED AN OPPORTUNITY TO CROSS EXAMINE THESE PERSONS WITH REFERENCE TO THE TRANSACTIONS ENTERED INTO WITH THE ASSESSEE. IN SUCH A SITUATION, SUCH STATEMENTS CANNOT BE MADE BASIS FOR MAKING AN ADDITION IN THE C ASE OF THE ASSESSEE. FURTHER ASSESSING OFFICER HAS DOUBTED THE CONFIRMATIONS. FRESH CONFIRMATIONS WERE FILED, HOWEVER, HE HAS NOT MADE ANY FURTHER ENQUIRY TO ESTABLISH THE NON - GENUINENESS OF THESE CONFIRMATIONS. THE QUANTITY OF MATERIAL/GOODS PURCHASED BY THESE INVOICES HAS BEEN DULY ITA NO . 5954 /DE L/2014 SHRI RAM HARI RAM & SONS PVT. LTD . 17 RECORDED IN THE BOOKS OF ACCOUNT INCLUDING THE STOCK REGISTER MAINTAINED BY THE ASSESSEE. QUANTITATIVE DETAILS OF OPENING STOCK, PURCHASES, CONSUMPTIONS/SALES AND CLOSING STOCK OF RAW MATERIAL AND FINISHED GOODS HAVE BEEN RE PORTED IN THE AUDITED BOOKS OF ACCOUNT. THE ASSESSEE IS ALSO ABLE TO FILE THE MONTHLY RETURN SUBMITTED WITH THE CENTRAL EXCISE DEPARTMENT IN WHICH QUANTITATIVE DETAILS OF THE PURCHASES FROM THESE CONCERNS WERE ALSO REPORTED. AFTER REDUCING THE QUANTITATIVE PURCHASES THROUGH THESE BILLS FROM THESE PERSONS, THE QUANTITATIVE DETAILS OF GOODS SOLD/EXPORTED CANNOT BE TALLIED. THE QUANTITATIVE DETAILS OF PURCHASES/SALES HAVE NOT BEEN DISPUTED BY THE REVENUE. THEREFORE, IT CANNOT BE SAID THAT THE SALES WERE MADE WITHOUT ANY PURCHASES. CONSIDERING THESE FACTS, WE FIND THAT THE ASSESSEE S NAME DID NOT APPEAR IN THE STATEMENTS RECORDED OF THE SUPPLIERS BY THE DIT (INVESTIGATION), JAIPUR. THE ASSESSING OFFICER HAS NOT MADE ANY FURTHER ENQUIRY WHEN THE ASSESSEE SUBMITT ED FRESH CONFIRMATIONS FROM THE SUPPLIERS. THE QUANTITATIVE DETAILS OF PURCHASES AND SALES HAVE NOT BEEN DOUBTED. ON SIMILAR FACTS, ITAT IN THE CASE OF PRADEEP KUMAR JAIN HUG VS. ITO IN ITA NO.1716/DEL/2011 IN ITS ORDER DATED 30.11.2011 HAD HELD AS UNDER: - 8. WE HAVE DULY CONSIDERED THE RIVAL CONTENTION AND GONE THOUGH THE RECORD CAREFULLY. IN ORDER TO CLAIM ANY EXPENDITURE NOT BEING EXPENSES DESCRIBED IN SECTION 30 TO 36 AND NOT BEING IN THE NATURE OF CAPITAL EXPENSES OR PERSONAL EXPENSES LAID OUT AND S PENT WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS, ONE S CLAIM HAS TO BE EXAMINED UNDER THE RESIDUARY PROVISION OF SECTION 37. HENCE, IN ORDER TO BE ELIGIBLE FOR EXPENSES UNDER THIS SECTION ONE HAS TO FULFILL THE CONDITIONS (I) THE EXPENDITURE MUST NOT BE GOVERNED BY THE PROVISIONS OF SECTION 30 TO 36 (II) EXPENDITURE MUST HAVE BEEN LAID OUT WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF THE BUSINESS OF THE ASSESSEE (III) THE EXPENDITURE MUST NOT BE PERSONAL IN NATURE (IV) THE EXPENDITURE MUST NOT BE CAP ITAL IN NATURE. THE EXPRESSION WHOLLY EMPLOYED IN SECTION 37 REFERS TO THE QUANTUM OF EXPENDITURE, WHILE THE WORD EXCLUSIVELY REFERS TO THE MOTIVE, OBJECTIVE AND PURPOSE OF THE EXPENDITURE. 9. BEFORE US, THERE ARE TWO SETS OF FACTS. ACCORDING TO THE ASSESSEE, IT HAS ENTERED INTO A GENUINE BUSINESS TRANSACTION. IN ITA NO . 5954 /DE L/2014 SHRI RAM HARI RAM & SONS PVT. LTD . 18 SUPPORT OF ITS CLAIM, IT HAS FILED CONFIRMATION FROM THE SELLER. IT HAS FILED EVIDENCE EXHIBITING THE PAYMENT MADE THROUGH ACCOUNT PAYEE CHEQUE. THE SELLER IS AN INCOME TAX ASSESSEE AND HAVIN G PERMANENT ACCOUNT NUMBER. ON THE OTHER HAND, THE DEPARTMENT IS POSSESSING STATEMENT OF THE SELLER RECORDED BY THE INVESTIGATION WING WHEREIN HE HAS DISCLOSED THAT NO SALE WAS MADE BUT ONLY ACCOMMODATION ENTRY WAS GIVEN. WE ARE REQUIRED TO EVALUATE THE EV IDENTIARY VALUE OF THIS STATEMENT. WHETHER IT CAN BE CONSIDERED AS A GOSPEL TRUTH AND ASSESSEE CAN BE BURDENED WITH THE TAX LIABILITY? THIS STATEMENT WAS RECORDED FROM THE BACK OF THE ASSESSEE. IT WAS NOT GIVEN AN OPPORTUNITY TO CROSS EXAMINE HIM. PROBABLY IF CASE WAS TO BE DECIDED ONLY ON THIS STATEMENT, WE WOULD HAVE REMITTED THE MATTER TO THE AO FOR READJUDICATION AFTER PROVIDING THE OPPORTUNITY OF CROSS EXAMINATION, BUT FOR THE SAKE OF ARGUMENTS, EVEN IF WE TAKE THIS STATEMENT AS ADMISSIBLE UNDER LAW TH EN ALSO SOLELY ON THE BASIS OF THIS STATEMENT THE OTHER EVIDENCE PRODUCED BY THE ASSESSEE CANNOT BE IGNORED. MR. VIKAS PARASHER MIGHT BE MAKING THIS STATEMENT FALSELY OR ALLEGING SUCH TYPE OF SITUATION IN ORDER TO SAVE HIS OWN SKIN. THE ASSESSEE HAS PRODUC ED COMPLETE VOUCHERS OF PURCHASES AND SALES, AO DID NOT FIND DEFECT. IT HAS PURCHASED GOODS OF MORE THAN ` 10 CRORE. IT HAS SOLD GOODS OF MORE THAN ` 9,88,00,000/ - . THE PURCHASES FORM M/S. VIKAS ENTERPRISES IS OF ONLY ROUGHLY ` 30 LACS. IN TERMS OF PERCENTAGE , IT IS NOT MORE THAN 5%. THE AO HAS ACCEPTED THE SALES DISCLOSED BY THE ASSESSEE. HE HAS ACCEPTED ALL MAJOR PURCHASES AND SALES. THE ASSESSEE IS IN THE BUSINESS OF SUCH AN ITEM WHICH IS SUBJECT TO CENTRAL EXCISE. THE CENTRAL EXCISE AUTHORITIES HAVE NOT DI SBELIEVED THESE BOOKS OF ACCOUNTS OR BILL OR VOUCHERS SUBMITTED BY IT. IN SUCH SITUATION, THE SOLE STATEMENT OF SHRI VIKAS PARASHER CAN BE A STARTING POINT OF INVESTIGATION BUT CANNOT BE A CONCLUSIVE EVIDENCE TO DISBELIEVE THE PURCHASES MADE BY THE ASSESSE E. THE AO OUGHT TO HAVE COLLECTED MORE CORROBORATIVE EVIDENCE. HE HAS ISSUED NOTICE U/S 143(2) FOR THE FIRST TIME ON 3RD JULY, 2008, BUT COULD TAKE UP THE PROCEEDINGS SERIOUSLY ON 10.11.2009. WHEN HE ISSUED A QUESTIONNAIRE IN DETAIL, HE PASSED THE ASSTT. O RDER ON 29.12.2009 WITHOUT CONDUCTING THE INQUIRY. RATHER IN OTHER WORDS WITHIN ONE AND A HALF MONTHS HE CONCLUDED THE PROCEEDING RELIED UPON THE STATEMENT OF A PERSON RECORDED FROM THE BACK OF THE ASSESSEE ITA NO . 5954 /DE L/2014 SHRI RAM HARI RAM & SONS PVT. LTD . 19 AND DISALLOWED THE PURCHASES. HE EVEN DID NOT TOU CH THE OTHER MATERIAL SUBMITTED BY THE ASSESSEE. THUS, TAKING INTO CONSIDERATION THE DETAILS OF PURCHASES DETAILS OF SALES DETAILS OF OTHER PARTIES AND ALL OTHER EVIDENCE PLACED ON THE RECORD WE ARE OF THE OPINION THAT AO FAILED TO COLLECT CONCLUSIVE EVIDE NCE ON THE RECORD TO SAY THAT PURCHASES WERE BOGUS. THE SOLE STATEMENT OF SHRI VINOD PARASHER DOES NOT INSPIRE CONFIDENCE TO US TO IGNORE THE ACCOUNTS OF THE ASSESSEE ACCEPTED BY THE CENTRAL EXCISE AUTHORITIES, MORE PARTICULARLY WHEN MORE THAN 95% OF ITS P URCHASES WERE FOUND TO BE IN ORDER. THE PURCHASES FROM M/S. VIKAS ENTERPRISES WERE NOT AT SUCH A HIGH RATES WHICH COULD ENABLE THE ASSESSEE TO INFLATE ITS EXPENSES. THE AVERAGE PURCHASE PRICE IS 101.69 PER KG AND AVERAGE SALE PRICE IS 104.43 IT HAS PURCHAS ED THE GOODS FROM M/S. VIKAS ENTERPRISES @ 104.16. IN THIS SITUATION, HOW IT WILL HELP THE ASSESSEE TO INFLATE ITS EXPENSES IS NOT DISCERNABLE. THE SPECIFIC DETAILS IN THIS REGARD ARE AVAILABLE ON PAGES 59 AND 60 OF THE PAPER BOOK. THUS, CONSIDERING ALL TH ESE ASPECTS, WE ALLOW THE APPEAL OF ASSESSEE AND DELETE THE ADDITIONS. IN VIEW OF THESE FACTS, WE FIND NO FAULT IN THE ORDER OF THE CIT (A). MOREOVER, THE ISSUE REGARDING NOT CARRYING OUT INDEPENDENT INVESTIGATION BY THE ASSESSING OFFICER, ADDITION CAN NOT BE MADE IS ALSO SUPPORTED BY THE FOLLOWING DECISIONS: - 1) CANERON CONE IND P LTD VS ACIT ITA NO. 4114/DEL/11, PRONOUNCED ON 3.05.2013. 2) CIT VS GANGESHWARI METAL PVT LTD. ITA 597/2012 'AS CAN BE SEEN FROM THE ABOVE EXTRACT, TWO TYPES OF CASES HAVE BEEN INDICATED. ONE IN WHICH THE ASSESSING OFFICER CARRIES OUT THE EXERCISE WHICH IS REQUIRED IN LAW AND THE OTHER IN WHICH THE ASSESSING OFFICER 'SITS BACK WITH FOLDED HANDS' TILL THE ASSESSEE EXHAUSTS ALL THE EVIDENCE OR MATERIAL IN HIS POSSESSION A ND THEN COMES FORWARD TO MERELY REJECT THE SAME ON THE PRESUMPTIONS. THE PRESENT CASE FALLS IN THE LATTER CATEGORY. HERE THE ASSESSING OFFICER, AFTER NOTING THE FACTS, MERELY REJECTED THE SAME. THIS WOULD BE APPARENT FROM THE OBSERVATIONS OF THE ASSESSING OFFICER IN THE ASSESSMENT ORDER TO THE FOLLOWING EFFECT: - ITA NO . 5954 /DE L/2014 SHRI RAM HARI RAM & SONS PVT. LTD . 20 'INVESTIGATION MADE BY THE INVESTIGATION WING OF THE DEPARTMENT CLEARLY SHOWED THAT THIS WAS NOTHING BUT A SHAM TRANSACTION OF ACCOMMODATION ENTRY. THE ASSESSEE WAS ASKED TO EXPLAIN AS TO WHY THE SAID AMOUNT OF RS.1,11,50,000/ - MAY NOT BE ADDED TO ITS INCOME. IN RESPONSE, THE ASSESSEE HAS SUBMITTED THAT THERE IS NO SUCH CREDIT IN THE BOOKS OF THE ASSESSEE. RATHER, THE ASSESSEE COMPANY HAS RECEIVED THE SHARE APPLICATION MONEY FOR ALLOTMENT OF ITS S HARE. IT WAS STATED THAT THE ACTUAL AMOUNT RECEIVED WAS RS. 55,50,000/ - AND NOT RS.1,11,50,000/ - AS MENTIONED IN THE NOTICE. THE ASSESSEE HAS FURNISHED DETAILS OF SUCH RECEIPTS AND THE CONTENTION OF THE ASSESSEE IN RESPECT OF THE AMOUNT IS FOUND CORRECT. A S SUCH THE UNEXPLAINED AMOUNT IS TO BE TAKEN AT RS.55,50,000/ - . THE ASSESSEE HAS FURTHER TRIED TO EXPLAIN THE SOURCE OF THIS AMOUNT OF RS.55,50,000/ - BY FURNISHING COPIES OF SHARE APPLICATION MONEY, BALANCE SHEET, ETC. OF THE PARTIES MENTIONED ABOVE AND AS SERTED THAT THE QUESTION OF ADDITION IN THE INCOME OF THE ASSESSEE DOES NOT ARISE. THIS EXPLANATION OF THE ASSESSEE HAS BEEN DULY CONSIDERED AND FOUND NOT ACCEPTABLE. THIS ENTRY REMAINS UNEXPLAINED IN THE HANDS OF THE ASSESSEE AS HAS BEEN ARRIVED BY THE IN VESTIGATION WING OF THE DEPARTMENT. AS SUCH ENTRIES OF RS.55,50,000/ - RECEIVED BY THE ASSESSEE ARE TREATED AS AN UNEXPLAINED CASH CREDIT IN THE HANDS OF THE ASSESSEE AND ADDED TO ITS INCOME. SINCE I AM SATISFIED THAT THE ASSESSEE HAS FURNISHED INACCURATE P ARTICULARS OF ITS INCOME, PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) ARE BEING INITIATED SEPARATELY.' THE FACTS OF NOVA PROMOTERS AND FINLEASE (P) LTD. (SUPRA) FALL IN THE FORMER CATEGORY AND THAT IS WHY THIS COURT DECIDED IN FAVOUR OF THE REVENUE IN TH AT CASE. HOWEVER, THE FACTS OF THE PRESENT CASE ARE CLEARLY DISTINGUISHABLE AND FALL IN THE SECOND CATEGORY AND ARE MORE IN LINE WITH FACTS OF LOVELY EXPORTS (P) LTD. (SUPRA). THERE WAS A CLEAR LACK OF INQUIRY ON THE PART OF THE ASSESSING OFFICER ONCE THE ASSESSEE HAD FURNISHED ALL THE MATERIAL WHICH WE HAVE ALREADY REFERRED TO ABOVE. IN SUCH AN EVENTUALITY NO ADDITION CAN BE MADE UNDER SECTION 68 OF THE ACT. CONSEQUENTLY, THE QUESTION IS ANSWERED IN THE NEGATIVE. THE DECISION OF THE TRIBUNAL IS CORRECT I N LAW. ITA NO . 5954 /DE L/2014 SHRI RAM HARI RAM & SONS PVT. LTD . 21 THE APPEAL IS DISMISSED. 3) CIT VS FAIR FINVEST LTD ITA 232/2012 PARA 8. 'THE DECISION IN THIS CASE IS BASED ON THE PECULIAR FACTS WHICH ATTRACT THE RATIO OF LOVELY EXPORTS (SUPRA). WHERE THE ASSESSEE ADDUCES EVIDENCE IN SUPPORT OF THE SHARE AP PLICATION MONIES, IT IS OPEN TO THE ASSESSING OFFICER TO EXAMINE IT AND REJECT IT ON TENABLE GROUNDS. IN CASE HE WISHES TO RELY ON THE REPORT OF THE INVESTIGATION AUTHORITIES, SOME MEANINGFUL ENQUIRY OUGHT TO BE CONDUCTED BY HIM TO ESTABLISH A LINK BETWEEN THE ASSESSEE AND THE ALLEGED HAWALA OPERATORS; SUCH A LINK WAS SHOWN TO BE PRESENT IN THE CASE OF NOVA PROMOTERS & FINLEASE (P) LTD. (SUPRA) RELIED UPON BY THE REVENUE. WE ARE THEREFORE NOT TO BE UNDERSTOOD TO CONVEY THAT IN ALL CASES OF SHARE CAPITAL A DDED UNDER SECTION 68, THE RATIO OF LOVELY EXPORTS (SUPRA) IS ATTRACTED, IRRESPECTIVE OF THE FACTS, EVIDENCE AND MATERIAL. NO SUBSTANTIAL QUESTION OF LAW ARISES. THE APPEAL IS ACCORDINGLY DISMISSED. ' 4) CIT VS EXPO GLOBE INDIA LTD ITA 1257/2011 PAR A 7. 'THIS COURT HAS CAREFULLY CONSIDERED THE SUBMISSIONS. THE PREVIOUS DISCUSSION, PARTICULARLY THE ORDER OF THE CIT (A), WOULD REVEAL THAT EVEN THOUGH THE ASSESSING OFFICER HAD INITIALLY CONCLUDED ON THE BASIS OF THE MATERIALS MADE AVAILABLE AT THAT STA GE THAT SERVICE OF THE ENTRY PROVIDERS HAD BEEN UTILIZED TO BRING IN CAPITAL, AFTER REMAND THE CIT (A) ELABORATELY TOOK INTO ACCOUNT CONSIDERABLE MATERIAL FURNISHED BY THE ASSESSEE. THESE INCLUDED INCOME TAX RETURNS, BALANCE SHEETS, ROC PARTICULARS AND BAN K ACCOUNT STATEMENTS. ON THE BASIS OF THESE, THE CIT (A) HELD THAT THE SHARE APPLICATION MONEY OR THE SOURCE OF THE SHARE APPLICATION MONEY HAD BEEN SATISFACTORILY EXPLAINED. THE ITA T WAS OF THE OPINION THAT NO INTERFERENCE WAS WARRANTED HAVING REGARD TO THE FACTS OF THIS CASE. THIS COURT IS OF THE OPINION THAT THE ONLY SENTENCE IN PARAGRAPH - 6 OF THE IMPUGNED ORDER THAT AMOUNTS WERE REFUNDED ITA NO . 5954 /DE L/2014 SHRI RAM HARI RAM & SONS PVT. LTD . 22 TO THE APPLICANTS ITSELF SHOULD NOT BE A GROUND TO CONCLUDE THAT THE FINDINGS RECORDED BY THE LOWER AUTHORITIES ARE NOT ON THE BASIS OF EVIDENCE. THE ENTIRE CONTROVERSY SOUGHT TO BE RAISED IS PURELY FACTUAL. 8. THE COURT IS NOT SATISFIED THAT THE VIEW OF THE TRIBUNAL IS SO UNREASONABLE AS TO WARRANT INTERFERENCE UNDER SECTION260A. 9. THE APPEAL IS ACCORDINGLY DISMIS SED. ' 5) CIT VS GOEL SONS GOLDEN ESTATE PVT LTD ITA 212/2012 PARA 3. 'WE HAVE EXAMINED THE SAID CONTENTION AND FIND THAT THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDINGS HAS FILED CONFIRMATION LETTERS FROM THE COMPANIES, THEIR PAN NUMBER, COPY OF BANK STATEMENTS, AFFIDAVITS AND BALANCE SHEET. THEREAFTER THE ASSESSING OFFICER HAD ASKED THE ASSESSEE TO PRODUCE THE SAID DIRECTORS/ PARTIES. ASSESSEE EXPRESSED ITS INABILITY TO PRODUCE THEM. THE ASSESSING OFFICER DID NOT CONSEQUENT THERETO CONDUCT AN Y INQUIRY AND CLOSED THE PROCEEDINGS. THIS IS A CASE WHERE THE ASSESSING OFFICER HAS FAILED TO CONDUCT NECESSARY INQUIRY, VERIFICATION AND DEAL WITH THE MATTER IN DEPTH SPECIALLY AFTER THE AFFIDAVIT/CONFIRMATION ALONG WITH THE BANK STATEMENTS ETC. WERE FIL ED. IN CASE THE ASSESSING OFFICER HAD CONDUCTED THE SAID ENQUIRIES AND INVESTIGATION PROBABLY THE CHALLENGE MADE BY THE REVENUE WOULD BE JUSTIFIED. IN THE ABSENCE OF THESE INQUIRIES AND NON - VERIFICATION OF THE DETAILS AT THE TIME OF ASSESSMENT PROCEEDINGS, THE FACTUAL FINDINGS RECORDED BY THE ASSESSING OFFICER WERE INCOMPLETE AND SPARSE. THE IMPUGNED ORDER PASSED CANNOT BE TREATED AND REGARDED AS PERVERSE. THE APPEAL IS DISMISSED AS NO SUBSTANTIAL QUESTION OF LAW ARISES. ' 6) ACIT VS PANCHANAN INTERNATION AL (P) LTD (DELHI BENCH) ITA 50/DEL/2011 PARA 8. 'WE HAVE HEARD THE RIVAL SUBMISSIONS OF BOTH THE PARTIES AND HAVE GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THE ASSESSEE HAD ACCEPTED SHARE APPLICATION MONEY OF RS.10,00,000/ - THROUGH BAN KING CHANNEL AND HAD FILED ITA NO . 5954 /DE L/2014 SHRI RAM HARI RAM & SONS PVT. LTD . 23 DETAILS/DOCUMENTS REGARDING THE ABOVE SAID COMPANIES. THE ASSESSING OFFICER WITHOUT GOING INTO THE DOCUMENTS AND WITHOUT CONDUCTING ANY ENQUIRY REJECTED THE DETAILS AND MADE THE ADDITION. THE LD CIT(A) L AFTER GOING THROUGH THE S UBMISSIONS MADE BY THE LD AR HAD RIGHTLY DELETED THE ADDITION. THE JUDGMENT OF HON'BLE HIGH COURT IN THE CASE OF GOEL SONS GOLDEN ESTATE PVT LTD. SQUARELY FITS IN THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE. IN THAT CASE, THE ASSESSEE HAD ACCEPTED RS.3 0 LAKHS AS SHARE APPLICATION MONEY FROM FIVE COMPANIES AND HAD FILED CONFIRMATIONS, PAN NUMBERS, BANK STATEMENT, BALANCE SHEET ETC. WITH THE ASSESSING OFFICER. THE ASSESSING OFFICER DID NOT CONDUCT ANY ENQUIRIES AND MADE THE ADDITION. THE RELEVANT OBSERVAT ION OF HON'BLE HIGH COURT ARE REPRODUCED BELOW: - 'WE HAVE EXAMINED THE SAID CONTENTION AND FIND THAT THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDINGS HAS FILED CONFIRMATION LETTERS FROM THE COMPANIES, THEIR PAN NUMBER, COPY OF BANK STATEMENTS, AF FIDAVITS AND BALANCE SHEET. THEREAFTER THE ASSESSING OFFICER HAD ASKED THE ASSESSEE TO PRODUCE THE SAID DIRECTORS/PARTIES. ASSESSEE EXPRESSED ITS INABILITY TO PRODUCE THEM. THE ASSESSING OFFICER DID NOT CONSEQUENT THERETO CONDUCT ANY INQUIRY AND CLOSED THE PROCEEDINGS. THIS IS A CASE WHERE THE ASSESSING OFFICER HAS FAILED TO CONDUCT NECESSARY INQUIRY, VERIFICATION AND DEAL WITH THE MATTER IN DEPTH SPECIALLY AFTER THE AFFIDAVIT/CONFIRMATION ALONG WITH THE BANK STATEMENTS ETC. WERE FILED. IN CASE, THE ASSESSI NG OFFICER HAD CONDUCTED THE SAID ENQUIRIES AND INVESTIGATION PROBABLY THE CHALLENGE MADE BY THE REVENUE WOULD BE JUSTIFIED. IN THE ABSENCE OF THESE INQUIRIES AND NON VERIFICATION OF THE DETAILS AT THE TIME OF ASSESSMENT PROCEEDINGS, THE FACTUAL FINDINGS R ECORDED BY THE ASSESSING OFFICER WERE INCOMPLETE AND SPARSE. THE IMPUGNED ORDER PASSED CANNOT BE TREATED AND REGARDED AS PERVERSE. THE APPEAL IS DISMISSED AS NO SUBSTANTIAL QUESTION OF LAW ARISES.' 9. FOLLOWING THE VARIOUS JUDICIAL PRONOUNCEMENTS INCLUDI NG ABOVE, WE ARE OF THE OPINION THAT THE CASE OF THE ASSESSEE IS SQUARELY COVERED BY THE ABOVE JUDGMENT AND THEREFORE THE LD ITA NO . 5954 /DE L/2014 SHRI RAM HARI RAM & SONS PVT. LTD . 24 CIT(A) HAD RIGHTLY DELETED THE ADDITION. IN VIEW OF THE ABOVE, WE DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF LD CIT(A). 10. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED.' IN VIEW OF THESE, WE SUSTAIN THE ORDER OF THE CIT (A) ON THE ABOVE GROUNDS. 12. WE, THEREFORE, CONSIDERING THE TOTALITY OF THE FACTS ARE OF THE VIEW THAT WHEN THE SALES FROM THE SAME ITE MS WERE ACCEPTED THE PURCHASES OF THOSE ITEMS CANNOT BE CONSIDERED AS BOGUS. IN THAT VIEW OF THE MATTER, THE ADDITION MADE BY THE AO AND SUSTAINED BY THE LD. CIT(A) IS DELETED. 13 . IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED . (ORDER PRONOUNCED IN THE COURT ON 13 /0 4 /2018 ) SD/ - SD/ - ( SUCHITRA KAMBLE ) (N. K. SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 13 /0 4 /2018 *SUBODH* COPY FORWARDED TO: 1 . APPELLANT 2 . RESPONDENT 3 . CIT 4 . CIT(APPEALS) 5 . DR : ITAT ASSISTANT REGISTRAR