PRIYANKA SANDEEP RUNWAL,MUMBAI V. THE DY COMM. OF INCOME TAX, CC-4(1), MUMBAI

ITA 6524/MUM/2024

AI Insights

The case involves Priyanka Sandeep Runwal, who appealed against the orders of the Commissioner of Income-tax (Appeals) - 52, Mumbai, for the assessment years 2014-15, 2015-16, and 2016-17. The primary issue was the addition of 56,00,000 as unexplained expenditure for cash purchases of jewellery from the Nirav Modi/Firestar group. The additions were based on digital records and statements from employees of the Nirav Modi group, which the assessee contested as being unsubstantiated and not directly linked to her. The Tribunal found procedural lapses in not providing the complete material for rebuttal and not allowing cross-examination, leading to the decision to allow the appeals and delete the additions.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 823079 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-12-2025
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: 2014-2015
• Appeal Filed On: 13-12-2024
• Other Referred Cases: Andaman Timber Industries v. CCE, Kishinchand Chellaram v. CIT, Chairman, Mining Board v. Ramjee, Hersh W. Chadha v. DDIT, Vadivelu Thevar & Anr. v. State of Madras, Addl. CIT v. Jay Engg. Works Ltd., CIT v. Metal Products of India, Surjeet Singh v. Telestar Travels Pvt. Ltd.
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: VIRABHADRA MAHAJAN
• Assessee Lawyers: VAIBHAV MEHTA
• Keywords: Reassessment proceedings; Unexplained expenditure; Document seized; Documents seized; Onus to prove; Principle of natural justice; Third party statement; Reason to believe; Opportunity of cross examination
• Section: 147; 148; 143(3); 132; 131

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “C” MUMBAI BEFORE SHRI OM PRAKASH KANT (ACCOUNTANT MEMBER) AND SHRI ANIKESH BANERJEE (JUDICIAL MEMBER) ITA No. 6524, 6522 & 6523/MUM/2024 Assessment Year: 2014-15, 2015-16 & 2016-17 Priyanka Sandeep Runwal, Plot No. 757, Marine Mansion, B J Road, Bandstand, Bandra West, Mumbai-400050. Vs. The Dy. CIT Central Circle-4(1), Room No. 418, 4th floor, Kautilya Bhavan, C-41 to C-43, G Block, Bandra Kurla Complex, Bandra (East), Mumbai-400051. PAN NO. ABRPR 1052 M Appellant Respondent Assessee by : Mr. Vaibhav Mehta Revenue by : Mr. Virabhadra Mahajan, Sr. DR (Virtually Present) Date of Hearing : 15/10/2025 Date of pronouncement : 23/12/2025 ORDER PER OM PRAKASH KANT, AM The captioned appeals are directed against a common order dated 14/10/2024 passed by the Ld. Commissioner of Income-tax (Appeals) – 52, Mumbai [in short ‘the Ld. CIT(A)’] for assessment years 2014-15, 2015-16 and 2016-17 respectively. Printed from counselvise.com 2. A common issue in therefore, the same were heard together and disposed off by way of this common order for the sake of convenience and avoiding repetition of facts. 3. Firstly, we take up the appeal for assessment year 2014 ITA No. 6524/Mum/2024. the lead and decision of the same might be applied mutandis. The grounds raised in appeal are reproduced as under: 1. In the facts and circumstances of the case and the law, the Hon'ble Commissioner of Income Tax (Appeal) 52 erred in holding that the notice u/s 148 of the Income accordance with the provisions of the Act and that the Learned Deputy Commissioner of Income Tax, Central Circle \"reason to believe\" to issue the notice u/s 148 of the Income Act, 12 1961. The appellant prays that the order of the Hon'ble CIT(A)-52 is dismissed and notice u/s 148 of the Income 1961 is held to be bad in law and is liable to be quashed. 2. In the facts and circumstances of the case and the law, the Hon'ble Commissioner of Income Tax (Appeal) confirming the action of the Learned Deputy Commissioner of Income Tax, Central Circle money' on purchase of jewellery of Rs. 56,00,000 as Unexplained Expenditure. The confirming action was made without appreciating the fact that no 'evidence' was 'provided' to the Appellant during the re statements recorded in the no show-cause notice was given to the Appellant. The appellant prays that the said action of Hon'ble CIT(A) the addition is deleted. 3. In the facts and circumstances of the case and the law, the Hon'ble Commissioner of Income Tax (Appeal) holding that the absence of cross deponents, not providing the Appellant with copies of third party statements and evidences relied on does not violate the principles of natural justice. The appellant prays that the order of the Hon'ble Priyanka Sandeep Runwal A common issue in dispute is involved in these appeals and therefore, the same were heard together and disposed off by way of this common order for the sake of convenience and avoiding Firstly, we take up the appeal for assessment year 2014 ITA No. 6524/Mum/2024. The parties agreed to take this Appeal as the lead and decision of the same might be applied The grounds raised in appeal are reproduced as under: 1. In the facts and circumstances of the case and the law, the Hon'ble Commissioner of Income Tax (Appeal) 52 erred in holding that the notice u/s 148 of the Income-tax Act, 1961 was issued in accordance with the provisions of the Act and that the Learned Deputy Commissioner of Income Tax, Central Circle eason to believe\" to issue the notice u/s 148 of the Income Act, 12 1961. The appellant prays that the order of the Hon'ble 52 is dismissed and notice u/s 148 of the Income 1961 is held to be bad in law and is liable to be quashed. n the facts and circumstances of the case and the law, the Hon'ble Commissioner of Income Tax (Appeal) - 52 has erred in confirming the action of the Learned Deputy Commissioner of Income Tax, Central Circle - 4(1) implicating the payment of 'On purchase of jewellery of Rs. 56,00,000 as Unexplained Expenditure. The confirming action was made without appreciating the fact that no 'evidence' was 'provided' to the Appellant during the re-assessment and based on third party statements recorded in the search action on a third party and that cause notice was given to the Appellant. The appellant prays that the said action of Hon'ble CIT(A)-52 is dismissed and the addition is deleted. 3. In the facts and circumstances of the case and the law, the Hon'ble Commissioner of Income Tax (Appeal) - 52 has erred in holding that the absence of cross-examination of third party deponents, not providing the Appellant with copies of third party statements and evidences relied on does not violate the principles of natural justice. The appellant prays that the order of the Hon'ble Priyanka Sandeep Runwal 2 ITA No. 6524, 6522 & 6523/MUM/2024 dispute is involved in these appeals and therefore, the same were heard together and disposed off by way of this common order for the sake of convenience and avoiding Firstly, we take up the appeal for assessment year 2014-15 in The parties agreed to take this Appeal as the lead and decision of the same might be applied mutatis The grounds raised in appeal are reproduced as under: 1. In the facts and circumstances of the case and the law, the Hon'ble Commissioner of Income Tax (Appeal) 52 erred in holding tax Act, 1961 was issued in accordance with the provisions of the Act and that the Learned Deputy Commissioner of Income Tax, Central Circle - 4(1) had eason to believe\" to issue the notice u/s 148 of the Income-tax Act, 12 1961. The appellant prays that the order of the Hon'ble 52 is dismissed and notice u/s 148 of the Income-tax Act, 1961 is held to be bad in law and is liable to be quashed. n the facts and circumstances of the case and the law, the 52 has erred in confirming the action of the Learned Deputy Commissioner of 4(1) implicating the payment of 'On- purchase of jewellery of Rs. 56,00,000 as Unexplained Expenditure. The confirming action was made without appreciating the fact that no 'evidence' was 'provided' to the assessment and based on third party search action on a third party and that cause notice was given to the Appellant. The appellant 52 is dismissed and 3. In the facts and circumstances of the case and the law, the 52 has erred in examination of third party deponents, not providing the Appellant with copies of third party statements and evidences relied on does not violate the principles of natural justice. The appellant prays that the order of the Hon'ble Printed from counselvise.com CIT(A)-52 is dismissed, held to be bad in law and liable to be quashed. 4. Briefly stated the facts of the case are that the assessee filed her return of income for the assessment year u on 31/07/2014 declaring total income of of Income was processed under section 143(1) of the Income Act, 1961 (“the Act”). 4.1 Subsequently, information was received from the Deputy Director of Income-tax, Unit section 132 of the Act had been conducted in the case of / Firestar Group which disclosed practices of accepting ‘ (Cash) from their customers against the sale of diamond / gold jewellery. The information revealed that the Assessee had purchased various items from the Firestar group including but not limited to (i) Bangle worth and (iii) Earrings wo ₹56,00,000 incurred through cash. The AO appraised the material on record, and came to believe that the Assessee not shown the source of cash payment incurred and all other material facts necessary for determination of the income of the Assessee. Accordingly, the AO recorded reasons to believe income escaped assessment and he of the Act on 11/02/2019. Priyanka Sandeep Runwal 52 is dismissed, held to be bad in law and liable to be Briefly stated the facts of the case are that the assessee filed return of income for the assessment year under consideration on 31/07/2014 declaring total income of ₹29,05,430/ of Income was processed under section 143(1) of the Income Subsequently, information was received from the Deputy tax, Unit–3(4), Mumbai, that a search under section 132 of the Act had been conducted in the case of / Firestar Group which disclosed practices of accepting ‘ sh) from their customers against the sale of diamond / gold jewellery. The information revealed that the Assessee had purchased various items from the Firestar group including but not limited to (i) Bangle worth ₹14,00,000, (ii) Ring worth (iii) Earrings worth ₹9,00,000 aggregating to a total of incurred through cash. The AO appraised the material on record, and came to believe that the Assessee prima facie not shown the source of cash payment incurred and all other facts necessary for determination of the income of the Assessee. Accordingly, the AO recorded reasons to believe income escaped assessment and he issued notice under section 148 of the Act on 11/02/2019. Priyanka Sandeep Runwal 3 ITA No. 6524, 6522 & 6523/MUM/2024 52 is dismissed, held to be bad in law and liable to be Briefly stated the facts of the case are that the assessee filed nder consideration 29,05,430/-. The return of Income was processed under section 143(1) of the Income-tax Subsequently, information was received from the Deputy 3(4), Mumbai, that a search under section 132 of the Act had been conducted in the case of Nirav Modi / Firestar Group which disclosed practices of accepting ‘On-Money’ sh) from their customers against the sale of diamond / gold jewellery. The information revealed that the Assessee had purchased various items from the Firestar group including but not 14,00,000, (ii) Ring worth ₹33,00,000/- aggregating to a total of incurred through cash. The AO appraised the material prima facie had not shown the source of cash payment incurred and all other facts necessary for determination of the income of the Assessee. Accordingly, the AO recorded reasons to believe that issued notice under section 148 Printed from counselvise.com 4.4 In response to the notice u/s 148 of the Act, the the return of income Assessing Officer issued requisite statutory notices to which the Assessee complied with from time to time. Reassessment was completed and Order u/s 147 r/w 143(3) was passed on 10/12/2019 determining the total income at 4.5 Aggrieved, the Assessee filed Appeal before the Ld. CIT(A) and objected to the additions made by the Assessing Officer. The Ld. CIT(A) passed an order on 14/10/2024 dismissing the appeal of the Assessee on all grounds. 4.6 Aggrieved by the Order of the Ld. CIT(A), the Assessee filed Appeal before the Income Tribunal) by way of raising grounds as reproduced abov 4.7 Ground No. 1 challenging the validity of the notice u/s 148 of the Act was not pressed by the Assessee and therefore the same is dismissed as infructuous. Ground Nos. 2 & 3 alleged cash purchase of jewellery 4.8 In Ground Nos. 2 and 3, the assessee has assailed the addition of ₹56,00,000/ unexplained expenditure, allegedly incurred towards cash purchase of jewellery from entities of the Nirav Modi / Firestar group Priyanka Sandeep Runwal In response to the notice u/s 148 of the Act, the the return of income declaring total income at ₹ Assessing Officer issued requisite statutory notices to which the Assessee complied with from time to time. Reassessment was pleted and Order u/s 147 r/w 143(3) was passed on 10/12/2019 determining the total income at ₹85,05, Aggrieved, the Assessee filed Appeal before the Ld. CIT(A) and objected to the additions made by the Assessing Officer. The Ld. der on 14/10/2024 dismissing the appeal of the Assessee on all grounds. 4.6 Aggrieved by the Order of the Ld. CIT(A), the Assessee filed Income-tax Appellate Tribunal ( in short the by way of raising grounds as reproduced abov Ground No. 1 challenging the validity of the notice u/s 148 of the Act was not pressed by the Assessee and therefore the same is dismissed as infructuous. Ground Nos. 2 & 3 – Addition of ₹56,00,000/- alleged cash purchase of jewellery (“on-money”) In Ground Nos. 2 and 3, the assessee has assailed the 56,00,000/- made by the Assessing Officer as unexplained expenditure, allegedly incurred towards cash purchase of jewellery from entities of the Nirav Modi / Firestar group Priyanka Sandeep Runwal 4 ITA No. 6524, 6522 & 6523/MUM/2024 In response to the notice u/s 148 of the Act, the Assessee filed ₹29,05,430. The Assessing Officer issued requisite statutory notices to which the Assessee complied with from time to time. Reassessment was pleted and Order u/s 147 r/w 143(3) was passed on ,430. Aggrieved, the Assessee filed Appeal before the Ld. CIT(A) and objected to the additions made by the Assessing Officer. The Ld. der on 14/10/2024 dismissing the appeal of the 4.6 Aggrieved by the Order of the Ld. CIT(A), the Assessee filed tax Appellate Tribunal ( in short the by way of raising grounds as reproduced above. Ground No. 1 challenging the validity of the notice u/s 148 of the Act was not pressed by the Assessee and therefore the same is on account of In Ground Nos. 2 and 3, the assessee has assailed the made by the Assessing Officer as unexplained expenditure, allegedly incurred towards cash purchase of jewellery from entities of the Nirav Modi / Firestar group. The Printed from counselvise.com principal grievance of the assessee is that the addition is founded exclusively on third-party digital material and statements recorded during search and survey operations in the case of a third party, without furnishing such material to the assessee granting an opportunity of cross requests made during the assessment proceedings. 4.9 A search and survey action was carried out by the Investigation Wing in the case of the Nirav Modi group, including Firestar Diamond Pvt. Ltd., Kala Ghoda, Mumbai. During the course of such action, it was allegedly noticed that the group was engaged in making cash sales of jewellery without recording the same in the regular books of account. digital records were found which, according to the Revenue, reflected such sales made outside the books. It was further alleged that the stock corresponding to such cash sales was adjusted through branch transfers and that the cash component was not disclosed in the books of account. Statements of certain employees and sales personnel of the group were recorded under section 131 of the Act, wherein a general modus operandi of accepting cash, partly or wholly, against jewellery sales was stated. The name assessee was stated to appear in such digital records for three assessment years, namely A.Y. 2014 16 (₹10,00,000/-) and A.Y. 2016 ₹1,02,50,000/-. On the basis of such information the As Priyanka Sandeep Runwal principal grievance of the assessee is that the addition is founded party digital material and statements recorded during search and survey operations in the case of a third party, without furnishing such material to the assessee granting an opportunity of cross-examination, despite specific requests made during the assessment proceedings. A search and survey action was carried out by the Investigation Wing in the case of the Nirav Modi group, including Firestar iamond Pvt. Ltd., Kala Ghoda, Mumbai. During the course of such action, it was allegedly noticed that the group was engaged in making cash sales of jewellery without recording the same in the regular books of account. During the course of the search, c digital records were found which, according to the Revenue, reflected such sales made outside the books. It was further alleged that the stock corresponding to such cash sales was adjusted through branch transfers and that the cash component was not closed in the books of account. Statements of certain employees and sales personnel of the group were recorded under section 131 of the Act, wherein a general modus operandi of accepting cash, partly or wholly, against jewellery sales was stated. The name assessee was stated to appear in such digital records for three assessment years, namely A.Y. 2014-15 (₹56,00,000/ ) and A.Y. 2016-17 (₹36,50,000/-), aggregating to . On the basis of such information the As Priyanka Sandeep Runwal 5 ITA No. 6524, 6522 & 6523/MUM/2024 principal grievance of the assessee is that the addition is founded party digital material and statements recorded during search and survey operations in the case of a third party, without furnishing such material to the assessee and without examination, despite specific A search and survey action was carried out by the Investigation Wing in the case of the Nirav Modi group, including Firestar iamond Pvt. Ltd., Kala Ghoda, Mumbai. During the course of such action, it was allegedly noticed that the group was engaged in making cash sales of jewellery without recording the same in the During the course of the search, certain digital records were found which, according to the Revenue, reflected such sales made outside the books. It was further alleged that the stock corresponding to such cash sales was adjusted through branch transfers and that the cash component was not closed in the books of account. Statements of certain employees and sales personnel of the group were recorded under section 131 of the Act, wherein a general modus operandi of accepting cash, partly or wholly, against jewellery sales was stated. The name of the assessee was stated to appear in such digital records for three 56,00,000/-), A.Y. 2015- ), aggregating to . On the basis of such information the Assessing Printed from counselvise.com Officer inferred that for the year under consideration, the assessee had purchased jewellery in cash amounting to of which were tabulated as under: S.No. Date Collection wise 1 16.05.2013 Embrace 2 11.11.2013 Celestial Solitaire Program 3 27.11.2013 Fluire Collection 4.10 The Assessing Officer called upon the assessee to explain the source of investment in the aforesaid jewellery. The assessee categorically denied having purchased any jewellery from Shri Nirav Modi or Firestar Diamonds during the relevant year. It was contended that the information received from the Investigation Wing, allegedly comprising loose sheets or digital data bearing the assessee’s name, as well as the statements of third employees, were never furnished to the assessee. It was further submitted that no evidence had been brought on record by the Assessing Officer to demonstrate that any actual cash had exchanged hands between the assessee and the alleged seller. The assessee also contended establish either the source of the alleged cash or its deployment by the seller through any cogent evidence. Priyanka Sandeep Runwal Officer inferred that for the year under consideration, the assessee had purchased jewellery in cash amounting to ₹56,00,000/ of which were tabulated as under: Collection- Sales person FS Style Product Selling value Embrace Aparna Chudasama ES- BG346PP Bangle INR 14,00,000 Celestial Solitaire Program Aparna Chudasama SO-RG330 Ring INR 33,00,000 Collection Aparna Chudasama FL-ER578 Earrings INR 9,00,000 TOTAL INR 56,00,000 The Assessing Officer called upon the assessee to explain the source of investment in the aforesaid jewellery. The assessee categorically denied having purchased any jewellery from Shri Nirav Firestar Diamonds during the relevant year. It was contended that the information received from the Investigation Wing, allegedly comprising loose sheets or digital data bearing the assessee’s name, as well as the statements of third never furnished to the assessee. It was further submitted that no evidence had been brought on record by the Assessing Officer to demonstrate that any actual cash had exchanged hands between the assessee and the alleged seller. The assessee also contended that the Assessing Officer failed to establish either the source of the alleged cash or its deployment by the seller through any cogent evidence. Priyanka Sandeep Runwal 6 ITA No. 6524, 6522 & 6523/MUM/2024 Officer inferred that for the year under consideration, the assessee 56,00,000/-, details Selling value CASH INR 14,00,000 INR 14,00,000 INR 33,00,000 INR 33,00,000 INR 9,00,000 INR 9,00,000 INR 56,00,000 The Assessing Officer called upon the assessee to explain the source of investment in the aforesaid jewellery. The assessee categorically denied having purchased any jewellery from Shri Nirav Firestar Diamonds during the relevant year. It was contended that the information received from the Investigation Wing, allegedly comprising loose sheets or digital data bearing the assessee’s name, as well as the statements of third-party never furnished to the assessee. It was further submitted that no evidence had been brought on record by the Assessing Officer to demonstrate that any actual cash had exchanged hands between the assessee and the alleged seller. The that the Assessing Officer failed to establish either the source of the alleged cash or its deployment by Printed from counselvise.com 4.11 It was further submitted that neither the statements relied upon were supplied to the assessee nor was th confronted with the same. The assessee specifically sought cross examination of the concerned employees of Firestar Diamonds, which was denied. Reliance was placed on the judgment of the Hon’ble Supreme Court in Appeal No. 4228 of 2006, dated 02.09.2015) to contend that statements of third parties cannot be used against an assessee without affording an opportunity of cross 4.12 The assessee also raised a legal objection to the application of the presumption under section 292C of the Act, contending that such presumption is available only against the person from whose possession the documents are found and cannot be mechanically extended to a third party. 4.13 The Assessing Officer, however, group had adopted a systematic modus operandi of under jewellery or diamonds by accepting part or whole consideration in cash without recording such cash sales in the books of account. According to him, the corresponding books and later adjusted as branch transfers. The Assessing Officer relied upon the digital evidence in the form of charts of cash transactions, maintained sales the group. Priyanka Sandeep Runwal It was further submitted that neither the statements relied upon were supplied to the assessee nor was th confronted with the same. The assessee specifically sought cross examination of the concerned employees of Firestar Diamonds, which was denied. Reliance was placed on the judgment of the Hon’ble Supreme Court in Andaman Timber Industries v. CCE Appeal No. 4228 of 2006, dated 02.09.2015) to contend that statements of third parties cannot be used against an assessee without affording an opportunity of cross-examination. The assessee also raised a legal objection to the application of the presumption under section 292C of the Act, contending that such presumption is available only against the person from whose possession the documents are found and cannot be mechanically extended to a third party.. The Assessing Officer, however, noted that the Nirav Modi group had adopted a systematic modus operandi of under jewellery or diamonds by accepting part or whole consideration in cash without recording such cash sales in the books of account. According to him, the corresponding stock was removed from the books and later adjusted as branch transfers. The Assessing Officer relied upon the digital evidence in the form of charts of cash transactions, maintained sales-person-wise in parallel records of Priyanka Sandeep Runwal 7 ITA No. 6524, 6522 & 6523/MUM/2024 It was further submitted that neither the statements relied upon were supplied to the assessee nor was the assessee confronted with the same. The assessee specifically sought cross- examination of the concerned employees of Firestar Diamonds, which was denied. Reliance was placed on the judgment of the Andaman Timber Industries v. CCE (Civil Appeal No. 4228 of 2006, dated 02.09.2015) to contend that statements of third parties cannot be used against an assessee examination. The assessee also raised a legal objection to the application of the presumption under section 292C of the Act, contending that such presumption is available only against the person from whose possession the documents are found and cannot be mechanically noted that the Nirav Modi group had adopted a systematic modus operandi of under-invoicing jewellery or diamonds by accepting part or whole consideration in cash without recording such cash sales in the books of account. stock was removed from the books and later adjusted as branch transfers. The Assessing Officer relied upon the digital evidence in the form of charts of cash wise in parallel records of Printed from counselvise.com 4.14 The Assessing Officer further relied upon the statement of Ms. Aparna Chudasama, sales executive of the Nirav Modi group, recorded on 16.01.2017 jewellery to customers in complete or part cash Officer has reproduced 16.01.2017. In her statement, she stated that she was working as Vice President with M/s Firestar Diamond Pvt. Ltd. at the Nirav Modi boutique at ITTS House, Kala Ghoda, Fort, Mumbai, since 12.01.2015 and was looki explained that overall management of the said premise is looked after by Mr. Danesh N. Mistry. She provided details of the other three sales executive namely Hemali Mehta, M.s Reshma Verma and Ms. Kitty Bhansali who used that she used to approach potential customers through social connections and references and then these customers visit the boutique for purchase of items. She explained the mode of the sales receipt as by way of RTGS/Cheque necessary details of PAN. Regarding the modus operandi of accepting the cash against the sale of item in the boutique she explained that some customers want to pay whole amount in cash or partly in cash and want the bills to be a customers want to pay part cash, want bills in the amount paid by them in cheque/RTGS/credit card and customers paying wholly in cash did not want the bills. She said that she did not have any any Priyanka Sandeep Runwal Officer further relied upon the statement of Ms. Aparna Chudasama, sales executive of the Nirav Modi group, recorded on 16.01.2017 wherein she stated that they often sold jewellery to customers in complete or part cash. Officer has reproduced the relevant part of her statement dated In her statement, she stated that she was working as Vice President with M/s Firestar Diamond Pvt. Ltd. at the Nirav Modi boutique at ITTS House, Kala Ghoda, Fort, Mumbai, since 12.01.2015 and was looking after high jewellery sales. explained that overall management of the said premise is looked after by Mr. Danesh N. Mistry. She provided details of the other three sales executive namely Hemali Mehta, M.s Reshma Verma and Ms. Kitty Bhansali who used to report to her. She explained that she used to approach potential customers through social connections and references and then these customers visit the boutique for purchase of items. She explained the mode of the sales receipt as by way of RTGS/Cheque/credit card/cash with the necessary details of PAN. Regarding the modus operandi of accepting the cash against the sale of item in the boutique she explained that some customers want to pay whole amount in cash or partly in cash and want the bills to be adjusted accordingly. The customers want to pay part cash, want bills in the amount paid by them in cheque/RTGS/credit card and customers paying wholly in cash did not want the bills. She said that she did not have any any Priyanka Sandeep Runwal 8 ITA No. 6524, 6522 & 6523/MUM/2024 Officer further relied upon the statement of Ms. Aparna Chudasama, sales executive of the Nirav Modi group, wherein she stated that they often sold . The Assessing the relevant part of her statement dated In her statement, she stated that she was working as Vice President with M/s Firestar Diamond Pvt. Ltd. at the Nirav Modi boutique at ITTS House, Kala Ghoda, Fort, Mumbai, since ng after high jewellery sales. She explained that overall management of the said premise is looked after by Mr. Danesh N. Mistry. She provided details of the other three sales executive namely Hemali Mehta, M.s Reshma Verma to report to her. She explained that she used to approach potential customers through social connections and references and then these customers visit the boutique for purchase of items. She explained the mode of the sales /credit card/cash with the necessary details of PAN. Regarding the modus operandi of accepting the cash against the sale of item in the boutique she explained that some customers want to pay whole amount in cash djusted accordingly. The customers want to pay part cash, want bills in the amount paid by them in cheque/RTGS/credit card and customers paying wholly in cash did not want the bills. She said that she did not have any any Printed from counselvise.com authority to finalize the cash com the customers with the management to Mr. Saourabh Shah or directly for the cash component to be accepted from the customers. She also explained that her entire team members get 1% commission on the sale price (including cash 4.15 The Assessing Officer also referred to the statement of Ms. Reshma Verma, Sales Executive, Firestar Diamonds, recorded on 16.01.2017 under section 131 of the Act, wherein she broadly endorsed the modus operandi described by Ms. Aparna Chudasama. 4.16 Further reliance was placed on the statement of Shri Saurabh Jitendra Shah, recorded on 15.01.2017 under section 131 of the Act at the Kala Ghoda showroom. He stated that he was responsible for maintaining the regular books of account and adm of cash against jewellery sales, though he stated that such cash transactions were accounted for as per the instructions of Shri Nirav Modi. 4.17 On the basis of the aforesaid statements and digital records, the Assessing Officer concluded th cash sales without recording them in the books of account and rejected the assessee’s contention that she had not purchased any jewellery, primarily on the ground that her name appeared in the digital data relating to cash sal Priyanka Sandeep Runwal authority to finalize the cash components. She put the request of the customers with the management to Mr. Saourabh Shah or directly for the cash component to be accepted from the customers. She also explained that her entire team members get 1% commission on the sale price (including cash component). The Assessing Officer also referred to the statement of Ms. Reshma Verma, Sales Executive, Firestar Diamonds, recorded on 16.01.2017 under section 131 of the Act, wherein she broadly endorsed the modus operandi described by Ms. Aparna Further reliance was placed on the statement of Shri Saurabh Jitendra Shah, recorded on 15.01.2017 under section 131 of the Act at the Kala Ghoda showroom. He stated that he was responsible for maintaining the regular books of account and adm of cash against jewellery sales, though he stated that such cash transactions were accounted for as per the instructions of Shri On the basis of the aforesaid statements and digital records, the Assessing Officer concluded that Firestar Diamonds had made cash sales without recording them in the books of account and rejected the assessee’s contention that she had not purchased any jewellery, primarily on the ground that her name appeared in the digital data relating to cash sales. Priyanka Sandeep Runwal 9 ITA No. 6524, 6522 & 6523/MUM/2024 ponents. She put the request of the customers with the management to Mr. Saourabh Shah or directly for the cash component to be accepted from the customers. She also explained that her entire team members get 1% component). The Assessing Officer also referred to the statement of Ms. Reshma Verma, Sales Executive, Firestar Diamonds, recorded on 16.01.2017 under section 131 of the Act, wherein she broadly endorsed the modus operandi described by Ms. Aparna Further reliance was placed on the statement of Shri Saurabh Jitendra Shah, recorded on 15.01.2017 under section 131 of the Act at the Kala Ghoda showroom. He stated that he was responsible for maintaining the regular books of account and admitted receipt of cash against jewellery sales, though he stated that such cash transactions were accounted for as per the instructions of Shri On the basis of the aforesaid statements and digital records, at Firestar Diamonds had made cash sales without recording them in the books of account and rejected the assessee’s contention that she had not purchased any jewellery, primarily on the ground that her name appeared in the Printed from counselvise.com 4.18 The Assessing Officer observed that the decoded digital evidence showed amounts reflected in the “cash” column representing sales made outside the books, which were subsequently adjusted through branch transfers. The digital records allegedly cont purchases aggregating to consideration. 4.19 The Assessing Officer rejected the assessee’s request for cross examination of the concerned witnesses. 4.20 Placing reliance on section Act, the Assessing Officer held that the contents of the seized digital data were presumed to be correct unless rebutted. According to him, the burden lay upon the assessee to prove that the seized documents did not pertain was on the assessee to rebut the statement of Ms. Aparna Chudasama recorded under section 131 on 16.01.2017. 4.21 In the above factual and legal background, the Assessing Officer treated the alleged cash purchase of j ₹56,00,000/- as unexplained expenditure and made the impugned addition. 5. On further appeal, the Ld. CIT(A), while adjudicating the issue on merits, principally rejected the assessee’s contention regarding Priyanka Sandeep Runwal The Assessing Officer observed that the decoded digital evidence showed amounts reflected in the “cash” column representing sales made outside the books, which were subsequently adjusted through branch transfers. The digital records allegedly contained the assessee’s name in respect of purchases aggregating to ₹56,00,000/- during the year under The Assessing Officer rejected the assessee’s request for cross examination of the concerned witnesses. Placing reliance on section 132(4A) and section 292C of the Act, the Assessing Officer held that the contents of the seized digital data were presumed to be correct unless rebutted. According to him, the burden lay upon the assessee to prove that the seized documents did not pertain to her. He further held that the onus was on the assessee to rebut the statement of Ms. Aparna Chudasama recorded under section 131 on 16.01.2017. In the above factual and legal background, the Assessing Officer treated the alleged cash purchase of jewellery amounting to as unexplained expenditure and made the impugned On further appeal, the Ld. CIT(A), while adjudicating the issue on merits, principally rejected the assessee’s contention regarding Priyanka Sandeep Runwal 10 ITA No. 6524, 6522 & 6523/MUM/2024 The Assessing Officer observed that the decoded digital evidence showed amounts reflected in the “cash” column representing sales made outside the books, which were subsequently adjusted through branch transfers. The digital ained the assessee’s name in respect of during the year under The Assessing Officer rejected the assessee’s request for cross- 132(4A) and section 292C of the Act, the Assessing Officer held that the contents of the seized digital data were presumed to be correct unless rebutted. According to him, the burden lay upon the assessee to prove that the seized to her. He further held that the onus was on the assessee to rebut the statement of Ms. Aparna Chudasama recorded under section 131 on 16.01.2017. In the above factual and legal background, the Assessing ewellery amounting to as unexplained expenditure and made the impugned On further appeal, the Ld. CIT(A), while adjudicating the issue on merits, principally rejected the assessee’s contention regarding Printed from counselvise.com denial of the right to cros action of the Assessing Officer by placing reliance on the statements of employees of the Nirav Modi / Firestar group and various judicial precedents. The substance of the findings recorded by the Ld. CIT(A) may be summarised as under: 5.1 The Ld. CIT(A) observed that the Assessing Officer had reproduced relevant portions of the statement of Ms. Aparna Chudasama, Sales Executive of the Nirav Modi group, recorded on 16.01.2017, wherein she confirmed the existence of a component in jewellery sales and explained the manner in which such transactions were effected. It was noted that she had stated that requests from customers for acceptance of cash were routed to the management, including Shri Saurabh Shah. Reliance placed on the statement of Shri Saurabh Shah, Executive of Firestar Diamond International Ltd., recorded on 15.01.2017, wherein he confirmed receipt of cash and stated that such cash transactions were accounted for as per the instructions of Shri Nirav Modi. The Ld. CIT(A) further noted that the statement of Ms. Reshma Verma, Senior Manager, recorded on 16.01.2017, also supported the said modus operandi. 5.2 The Ld. CIT(A) then referred to the decision of the Hon’ble Supreme Court in Vadivelu Theva 1957 SC 614) to hold that even the testimony of a single credible Priyanka Sandeep Runwal denial of the right to cross-examination. The Ld. CIT(A) upheld the action of the Assessing Officer by placing reliance on the statements of employees of the Nirav Modi / Firestar group and various judicial precedents. The substance of the findings recorded by the Ld. summarised as under: The Ld. CIT(A) observed that the Assessing Officer had reproduced relevant portions of the statement of Ms. Aparna Chudasama, Sales Executive of the Nirav Modi group, recorded on 16.01.2017, wherein she confirmed the existence of a component in jewellery sales and explained the manner in which such transactions were effected. It was noted that she had stated that requests from customers for acceptance of cash were routed to the management, including Shri Saurabh Shah. Reliance placed on the statement of Shri Saurabh Shah, Executive of Firestar Diamond International Ltd., recorded on 15.01.2017, wherein he confirmed receipt of cash and stated that such cash transactions were accounted for as per the instructions of Shri Nirav Modi. The Ld. CIT(A) further noted that the statement of Ms. Reshma Verma, Senior Manager, recorded on 16.01.2017, also supported the said modus operandi. The Ld. CIT(A) then referred to the decision of the Hon’ble Vadivelu Thevar & Anr. v. State of Madras 1957 SC 614) to hold that even the testimony of a single credible Priyanka Sandeep Runwal 11 ITA No. 6524, 6522 & 6523/MUM/2024 examination. The Ld. CIT(A) upheld the action of the Assessing Officer by placing reliance on the statements of employees of the Nirav Modi / Firestar group and various judicial precedents. The substance of the findings recorded by the Ld. The Ld. CIT(A) observed that the Assessing Officer had reproduced relevant portions of the statement of Ms. Aparna Chudasama, Sales Executive of the Nirav Modi group, recorded on 16.01.2017, wherein she confirmed the existence of a cash component in jewellery sales and explained the manner in which such transactions were effected. It was noted that she had stated that requests from customers for acceptance of cash were routed to the management, including Shri Saurabh Shah. Reliance was also placed on the statement of Shri Saurabh Shah, Executive of Firestar Diamond International Ltd., recorded on 15.01.2017, wherein he confirmed receipt of cash and stated that such cash transactions were accounted for as per the instructions of Shri Nirav Modi. The Ld. CIT(A) further noted that the statement of Ms. Reshma Verma, Senior Manager, recorded on 16.01.2017, also The Ld. CIT(A) then referred to the decision of the Hon’ble r & Anr. v. State of Madras (AIR 1957 SC 614) to hold that even the testimony of a single credible Printed from counselvise.com witness is sufficient and does not necessarily require corroboration. According to the Ld. CIT(A), the present case was supported not merely by one statement records containing specific dates, description of jewellery items, styles and amounts of cash transactions, which, in his view, constituted adequate material to sustain the addition. 5.3 The Ld. CIT(A) further relied Supreme Court in Chairman, Mining Board v. Ramjee 965) to emphasise that the principles of natural justice are flexible and context-dependent, and that procedural fairness must be judged on the totality of cir assessee cannot rely on technical objections while failing to discharge the onus cast upon him under the Act. 5.4 Reliance was also placed on the decision of the Hon’ble ITAT in Hersh W. Chadha v. DDIT income-tax proceedings, the assessee is required to furnish reasonable and plausible explanations to discharge the burden of proof, and that where explanations are incomplete or contradictory, the Assessing Officer is justified in d The Ld. CIT(A) further noted that income governed by the strict rules of evidence under the Indian Evidence Act and that the Assessing Officer is entitled to act on material which may not be admissible Priyanka Sandeep Runwal witness is sufficient and does not necessarily require corroboration. According to the Ld. CIT(A), the present case was supported not merely by one statement but by multiple statements and digital records containing specific dates, description of jewellery items, styles and amounts of cash transactions, which, in his view, constituted adequate material to sustain the addition. The Ld. CIT(A) further relied upon the judgment of the Hon’ble Chairman, Mining Board v. Ramjee 965) to emphasise that the principles of natural justice are flexible dependent, and that procedural fairness must be judged on the totality of circumstances. It was observed that an assessee cannot rely on technical objections while failing to discharge the onus cast upon him under the Act. Reliance was also placed on the decision of the Hon’ble ITAT in Hersh W. Chadha v. DDIT (43 SOT 544), wherein it was held that in tax proceedings, the assessee is required to furnish reasonable and plausible explanations to discharge the burden of proof, and that where explanations are incomplete or contradictory, the Assessing Officer is justified in drawing reasonable inferences. The Ld. CIT(A) further noted that income-tax proceedings are not governed by the strict rules of evidence under the Indian Evidence Act and that the Assessing Officer is entitled to act on material which may not be admissible in a court of law. Priyanka Sandeep Runwal 12 ITA No. 6524, 6522 & 6523/MUM/2024 witness is sufficient and does not necessarily require corroboration. According to the Ld. CIT(A), the present case was supported not but by multiple statements and digital records containing specific dates, description of jewellery items, styles and amounts of cash transactions, which, in his view, constituted adequate material to sustain the addition. upon the judgment of the Hon’ble Chairman, Mining Board v. Ramjee (AIR 1977 SC 965) to emphasise that the principles of natural justice are flexible dependent, and that procedural fairness must be cumstances. It was observed that an assessee cannot rely on technical objections while failing to Reliance was also placed on the decision of the Hon’ble ITAT in ein it was held that in tax proceedings, the assessee is required to furnish reasonable and plausible explanations to discharge the burden of proof, and that where explanations are incomplete or contradictory, rawing reasonable inferences. tax proceedings are not governed by the strict rules of evidence under the Indian Evidence Act and that the Assessing Officer is entitled to act on material Printed from counselvise.com 5.6 The Ld. CIT(A) also referred to the decisions of the Hon’ble Delhi High Court in Addl. CIT v. Jay Engg. Works Ltd. and the Hon’ble Punjab & Haryana High Court in Products of India (150 ITR 714) to hold that the Assessing Officer may collect information in any manner and utilise the same for framing the assessment, provided there exists material on record to support the addition. Reference was further made to the decision of the Hon’ble Bombay High Court in (264 ITR 154) to hold that where a transaction does not appear to be genuine or above board, the addition deserves to be sustained. 5.7 With regard to the plea of denial of cross CIT(A) held that the right to cross Reliance was placed on several judicial pronouncements, including State of J&K v. Bakshi Gulam Mohd. Union of India, Kanungo & Co. v. Collector of Customs Chhabra v. Union of India Director of Enforcement examination depends upon the facts of each case and that denial thereof does not ipso facto amount to violatio natural justice, unless prejudice is demonstrated. 5.8 On the basis of the above reasoning, the Ld. CIT(A) concluded that sufficient material existed to sustain the findings of the Assessing Officer and that no violation of the princ Priyanka Sandeep Runwal The Ld. CIT(A) also referred to the decisions of the Hon’ble Addl. CIT v. Jay Engg. Works Ltd. and the Hon’ble Punjab & Haryana High Court in (150 ITR 714) to hold that the Assessing Officer may collect information in any manner and utilise the same for framing the assessment, provided there exists material on record to support the addition. Reference was further made to the decision of ’ble Bombay High Court in ITC Classic Finance Ltd. v. DCIT (264 ITR 154) to hold that where a transaction does not appear to be genuine or above board, the addition deserves to be sustained. With regard to the plea of denial of cross-examination, the L CIT(A) held that the right to cross-examination is not absolute. Reliance was placed on several judicial pronouncements, including State of J&K v. Bakshi Gulam Mohd., Nath International Sales v. Kanungo & Co. v. Collector of Customs Chhabra v. Union of India and Telestar Travels Pvt. Ltd. v. Special Director of Enforcement, to conclude that the requirement of cross examination depends upon the facts of each case and that denial thereof does not ipso facto amount to violation of the principles of natural justice, unless prejudice is demonstrated. On the basis of the above reasoning, the Ld. CIT(A) concluded that sufficient material existed to sustain the findings of the Assessing Officer and that no violation of the princ Priyanka Sandeep Runwal 13 ITA No. 6524, 6522 & 6523/MUM/2024 The Ld. CIT(A) also referred to the decisions of the Hon’ble Addl. CIT v. Jay Engg. Works Ltd. (113 ITR 389) and the Hon’ble Punjab & Haryana High Court in CIT v. Metal (150 ITR 714) to hold that the Assessing Officer may collect information in any manner and utilise the same for framing the assessment, provided there exists material on record to support the addition. Reference was further made to the decision of ITC Classic Finance Ltd. v. DCIT (264 ITR 154) to hold that where a transaction does not appear to be genuine or above board, the addition deserves to be sustained. examination, the Ld. examination is not absolute. Reliance was placed on several judicial pronouncements, including Nath International Sales v. Kanungo & Co. v. Collector of Customs, Surjeet Singh Telestar Travels Pvt. Ltd. v. Special , to conclude that the requirement of cross- examination depends upon the facts of each case and that denial n of the principles of On the basis of the above reasoning, the Ld. CIT(A) concluded that sufficient material existed to sustain the findings of the Assessing Officer and that no violation of the principles of natural Printed from counselvise.com justice had occurred. Accordingly, the addition of made for Assessment Year 2014 Nos. 2, 3, 4 and 5 raised by the assessee were dismissed. 6. As regards the grounds relating to the merits of the add Ld. counsel for the assessee submitted that the impugned addition rests solely on two alleged pieces of material, namely: (i) digital data in the form of charts reflecting purported cash sales found during search operations in the case of the Ni statements of certain employees of the said group, recorded during the course of the search. It was contended that neither the complete digital material nor the statements of the said employees were ever furnished to the assessee a proceedings. 6.1 The Ld. counsel submitted that the statement of Ms. Aparna Chudasama, heavily relied upon by the Assessing Officer, does not name the assessee nor does it attribute any specific cash transaction to her. At b business practice allegedly followed by the Nirav Modi group of accepting cash, partly or wholly, against jewellery sales. It was emphasised that no credible or independent corroborative evidence has been brought on r purchased any jewellery or made any cash payment. The assessee has consistently denied the alleged transaction. Priyanka Sandeep Runwal justice had occurred. Accordingly, the addition of made for Assessment Year 2014-15 was confirmed and Ground Nos. 2, 3, 4 and 5 raised by the assessee were dismissed. As regards the grounds relating to the merits of the add Ld. counsel for the assessee submitted that the impugned addition rests solely on two alleged pieces of material, namely: (i) digital data in the form of charts reflecting purported cash sales found during search operations in the case of the Nirav Modi group; and (ii) statements of certain employees of the said group, recorded during the course of the search. It was contended that neither the complete digital material nor the statements of the said employees were ever furnished to the assessee at any stage of the reassessment The Ld. counsel submitted that the statement of Ms. Aparna Chudasama, heavily relied upon by the Assessing Officer, does not name the assessee nor does it attribute any specific cash transaction to her. At best, the statement refers to a general business practice allegedly followed by the Nirav Modi group of accepting cash, partly or wholly, against jewellery sales. It was emphasised that no credible or independent corroborative evidence has been brought on record to establish that the assessee, in fact, purchased any jewellery or made any cash payment. The assessee has consistently denied the alleged transaction. Priyanka Sandeep Runwal 14 ITA No. 6524, 6522 & 6523/MUM/2024 justice had occurred. Accordingly, the addition of ₹56,00,000/- 15 was confirmed and Ground Nos. 2, 3, 4 and 5 raised by the assessee were dismissed. As regards the grounds relating to the merits of the addition, the Ld. counsel for the assessee submitted that the impugned addition rests solely on two alleged pieces of material, namely: (i) digital data in the form of charts reflecting purported cash sales found during rav Modi group; and (ii) statements of certain employees of the said group, recorded during the course of the search. It was contended that neither the complete digital material nor the statements of the said employees were ever t any stage of the reassessment The Ld. counsel submitted that the statement of Ms. Aparna Chudasama, heavily relied upon by the Assessing Officer, does not name the assessee nor does it attribute any specific cash est, the statement refers to a general business practice allegedly followed by the Nirav Modi group of accepting cash, partly or wholly, against jewellery sales. It was emphasised that no credible or independent corroborative evidence ecord to establish that the assessee, in fact, purchased any jewellery or made any cash payment. The assessee Printed from counselvise.com 6.2 It was further submitted that despite a specific and formal request made during the reassessm 06.12.2019, the assessee was not afforded any opportunity to cross-examine the employees of the Nirav Modi group whose statements were relied upon. Reliance was placed on the judgment of the Hon’ble Supreme Court in CCE (supra)to contend that statements of third parties cannot be used against an assessee without affording an opportunity of cross examination. 6.3 The Ld. counsel further drew attention to a material inconsistency in the evidence r In her statement recorded on 16.01.2017, Ms. Aparna Chudasama categorically stated that she had joined the Nirav Modi group on 12.01.2015. However, in the tabulation reproduced in paragraph 5.1 of the assessment order, for transactions purportedly undertaken in the year 2013. It was submitted that this glaring inconsistency strikes at the very root of the credibility and reliability of the digital records relied upon by the Assessing Officer. 6.4 In response to the contention of the Ld. Departmental Representative that the relevant material had been duly provided, the assessee filed a clarification note pointing out that the only documents supplied comprised: (i) an information letter Priyanka Sandeep Runwal It was further submitted that despite a specific and formal request made during the reassessment proceedings vide letter dated 06.12.2019, the assessee was not afforded any opportunity to examine the employees of the Nirav Modi group whose statements were relied upon. Reliance was placed on the judgment of the Hon’ble Supreme Court in Andaman Timber Industries v. (supra)to contend that statements of third parties cannot be used against an assessee without affording an opportunity of cross The Ld. counsel further drew attention to a material inconsistency in the evidence relied upon by the Assessing Officer. In her statement recorded on 16.01.2017, Ms. Aparna Chudasama categorically stated that she had joined the Nirav Modi group on 12.01.2015. However, in the tabulation reproduced in paragraph 5.1 of the assessment order, her name appears as the sales person for transactions purportedly undertaken in the year 2013. It was submitted that this glaring inconsistency strikes at the very root of the credibility and reliability of the digital records relied upon by the In response to the contention of the Ld. Departmental Representative that the relevant material had been duly provided, the assessee filed a clarification note pointing out that the only documents supplied comprised: (i) an information letter Priyanka Sandeep Runwal 15 ITA No. 6524, 6522 & 6523/MUM/2024 It was further submitted that despite a specific and formal ent proceedings vide letter dated 06.12.2019, the assessee was not afforded any opportunity to examine the employees of the Nirav Modi group whose statements were relied upon. Reliance was placed on the judgment n Timber Industries v. (supra)to contend that statements of third parties cannot be used against an assessee without affording an opportunity of cross- The Ld. counsel further drew attention to a material elied upon by the Assessing Officer. In her statement recorded on 16.01.2017, Ms. Aparna Chudasama categorically stated that she had joined the Nirav Modi group on 12.01.2015. However, in the tabulation reproduced in paragraph her name appears as the sales person for transactions purportedly undertaken in the year 2013. It was submitted that this glaring inconsistency strikes at the very root of the credibility and reliability of the digital records relied upon by the In response to the contention of the Ld. Departmental Representative that the relevant material had been duly provided, the assessee filed a clarification note pointing out that the only documents supplied comprised: (i) an information letter received by Printed from counselvise.com the Assessing Officer from the Investigation Wing; and (ii) a statement of Ms. Aparna Chudasama recorded under section 131 of the Act on 19.04.2018 along with an annexure. It was submitted that even this information did not contain any document evidence linking the alleged cash amounts to the assessee, nor did it provide any details or description of the jewellery allegedly purchased. 6.5 With regard to the statement of Ms. Aparna Chudasama recorded on 19.04.2018, it was pointed out that the never furnished with the earlier statement recorded on 16.01.2017, which formed the primary basis of the addition. A perusal of the later statement clearly shows that Ms. Chudasama was merely shown a list of names and asked to identify whether clients or potential clients of the Nirav Modi group. She categorically stated that she did not remember the mode of payment in respect of the transactions mentioned and did not confirm any cash payment by the assessee. The annexure accompanying mentions the name of the assessee, without any description of jewellery or confirmation of cash payment. 6.6 It was thus contended that at no point did Ms. Aparna Chudasama admit that the assessee had purchased jewellery in cash from the Nirav Modi group. The reliance placed on such statements, without corroboration and without affording an Priyanka Sandeep Runwal the Assessing Officer from the Investigation Wing; and (ii) a statement of Ms. Aparna Chudasama recorded under section 131 of the Act on 19.04.2018 along with an annexure. It was submitted that even this information did not contain any document evidence linking the alleged cash amounts to the assessee, nor did it provide any details or description of the jewellery allegedly With regard to the statement of Ms. Aparna Chudasama recorded on 19.04.2018, it was pointed out that the never furnished with the earlier statement recorded on 16.01.2017, which formed the primary basis of the addition. A perusal of the later statement clearly shows that Ms. Chudasama was merely shown a list of names and asked to identify whether clients or potential clients of the Nirav Modi group. She categorically stated that she did not remember the mode of payment in respect of the transactions mentioned and did not confirm any cash payment by the assessee. The annexure accompanying the statement merely mentions the name of the assessee, without any description of jewellery or confirmation of cash payment. It was thus contended that at no point did Ms. Aparna Chudasama admit that the assessee had purchased jewellery in the Nirav Modi group. The reliance placed on such statements, without corroboration and without affording an Priyanka Sandeep Runwal 16 ITA No. 6524, 6522 & 6523/MUM/2024 the Assessing Officer from the Investigation Wing; and (ii) a statement of Ms. Aparna Chudasama recorded under section 131 of the Act on 19.04.2018 along with an annexure. It was submitted that even this information did not contain any documentary evidence linking the alleged cash amounts to the assessee, nor did it provide any details or description of the jewellery allegedly With regard to the statement of Ms. Aparna Chudasama recorded on 19.04.2018, it was pointed out that the assessee was never furnished with the earlier statement recorded on 16.01.2017, which formed the primary basis of the addition. A perusal of the later statement clearly shows that Ms. Chudasama was merely shown a list of names and asked to identify whether they were clients or potential clients of the Nirav Modi group. She categorically stated that she did not remember the mode of payment in respect of the transactions mentioned and did not confirm any cash payment the statement merely mentions the name of the assessee, without any description of It was thus contended that at no point did Ms. Aparna Chudasama admit that the assessee had purchased jewellery in the Nirav Modi group. The reliance placed on such statements, without corroboration and without affording an Printed from counselvise.com opportunity of cross untenable. 6.7 Reliance was further placed on the decision of the coordinate bench of the Hon’ble Mumbai ITAT in v. DCIT, Central Circle dated 2023), wherein, on similar facts involving alleged cash purchases from the Nirav Modi group, the Tribunal held that additions based solely on third without furnishing the same to the assessee and without granting an opportunity of cross was submitted that the ratio of the said decision squarely applies to the facts of the present case and warrants deletion of the impugned addition. 7. We have heard the rival submissions and carefully perused the material placed on record. It is an undisputed position that a search and survey action was carried out in the case Modi group, including the showroom of Firestar Diamond Pvt. Ltd. at Kala Ghoda, Fort, Mumbai. During such action, certain digital records were found and statements of sales personnel were recorded, wherein a general practice of accepting cash, partly, against jewellery sales was stated. It was also alleged that the stock corresponding to such cash sales was adjusted through Priyanka Sandeep Runwal opportunity of cross-examination, was submitted to be legally Reliance was further placed on the decision of the coordinate the Hon’ble Mumbai ITAT in Shri Avinash Nivrutti Bhosale v. DCIT, Central Circle–2(3) (ITA Nos. 529 & 530/Mum/2021, order dated 2023), wherein, on similar facts involving alleged cash purchases from the Nirav Modi group, the Tribunal held that ased solely on third-party statements and material, without furnishing the same to the assessee and without granting an opportunity of cross-examination, are unsustainable in law. It was submitted that the ratio of the said decision squarely applies to facts of the present case and warrants deletion of the impugned We have heard the rival submissions and carefully perused the material placed on record. It is an undisputed position that a search and survey action was carried out in the case Modi group, including the showroom of Firestar Diamond Pvt. Ltd. at Kala Ghoda, Fort, Mumbai. During such action, certain digital records were found and statements of sales personnel were recorded, wherein a general practice of accepting cash, partly, against jewellery sales was stated. It was also alleged that the stock corresponding to such cash sales was adjusted through Priyanka Sandeep Runwal 17 ITA No. 6524, 6522 & 6523/MUM/2024 examination, was submitted to be legally Reliance was further placed on the decision of the coordinate Shri Avinash Nivrutti Bhosale (ITA Nos. 529 & 530/Mum/2021, order dated 2023), wherein, on similar facts involving alleged cash purchases from the Nirav Modi group, the Tribunal held that party statements and material, without furnishing the same to the assessee and without granting examination, are unsustainable in law. It was submitted that the ratio of the said decision squarely applies to facts of the present case and warrants deletion of the impugned We have heard the rival submissions and carefully perused the material placed on record. It is an undisputed position that a search and survey action was carried out in the case of the Nirav Modi group, including the showroom of Firestar Diamond Pvt. Ltd. at Kala Ghoda, Fort, Mumbai. During such action, certain digital records were found and statements of sales personnel were recorded, wherein a general practice of accepting cash, wholly or partly, against jewellery sales was stated. It was also alleged that the stock corresponding to such cash sales was adjusted through Printed from counselvise.com branch transfers and the cash component was not reflected in the regular books of account. 7.1 The Assessing Off addition on two pieces of material, namely: (i) digital data allegedly reflecting cash sales, recovered during search operations in the case of the Nirav Modi / Firestar group; and (ii) statements recorded under section 131 of employees and sales personnel of the said group, particularly the statement of Ms. Aparna Chudasama. A tabulation of transactions aggregating to reproduced in the assessment order. However, it is evident that the complete digital data and the full statements relied upon were neither furnished to the assessee nor formally confronted to her, despite specific requests. The assessee’s request for cross examination of the concerned third unaddressed. 7.2 Even during the course of hearing before us, only partial sheets pertaining to three financial years were shown, wherein the names of customers ( except assessee) were largely masked and no details of the jewellery allegedly sold to the assessee were forthcoming. The digital material, by itself, does not establish the alleged transaction and derives its entire evidentiary value from the statements of third statements of the concerned employees were never made availabl Priyanka Sandeep Runwal branch transfers and the cash component was not reflected in the regular books of account. The Assessing Officer has primarily rested the impugned addition on two pieces of material, namely: (i) digital data allegedly reflecting cash sales, recovered during search operations in the case of the Nirav Modi / Firestar group; and (ii) statements recorded on 131 of employees and sales personnel of the said group, particularly the statement of Ms. Aparna Chudasama. A tabulation of transactions aggregating to ₹56,00,000/ reproduced in the assessment order. However, it is evident that the data and the full statements relied upon were neither furnished to the assessee nor formally confronted to her, despite specific requests. The assessee’s request for cross examination of the concerned third-party witnesses also remained Even during the course of hearing before us, only partial sheets pertaining to three financial years were shown, wherein the names of customers ( except assessee) were largely masked and no details of the jewellery allegedly sold to the assessee were coming. The digital material, by itself, does not establish the alleged transaction and derives its entire evidentiary value from the statements of third-party employees. Likewise, the complete statements of the concerned employees were never made availabl Priyanka Sandeep Runwal 18 ITA No. 6524, 6522 & 6523/MUM/2024 branch transfers and the cash component was not reflected in the icer has primarily rested the impugned addition on two pieces of material, namely: (i) digital data allegedly reflecting cash sales, recovered during search operations in the case of the Nirav Modi / Firestar group; and (ii) statements recorded on 131 of employees and sales personnel of the said group, particularly the statement of Ms. Aparna Chudasama. A 56,00,000/- was reproduced in the assessment order. However, it is evident that the data and the full statements relied upon were neither furnished to the assessee nor formally confronted to her, despite specific requests. The assessee’s request for cross- party witnesses also remained Even during the course of hearing before us, only partial sheets pertaining to three financial years were shown, wherein the names of customers ( except assessee) were largely masked and no details of the jewellery allegedly sold to the assessee were coming. The digital material, by itself, does not establish the alleged transaction and derives its entire evidentiary value from the party employees. Likewise, the complete statements of the concerned employees were never made available Printed from counselvise.com to the assessee beyond selective extracts reproduced in the assessment order. The assessee was thus deprived of a fair and effective opportunity to rebut the material relied upon by the Assessing Officer. 7.3 It is well settled that where an addition is substantially or exclusively on third material, denial of an opportunity to cross results in a serious procedural infirmity. In such circumstances, reliance on third-party statements, without aff reasonable opportunity to test their veracity, cannot be accepted as conclusive proof of the alleged transaction. Any addition made on such a foundation is liable to be struck down as being violative of the principles of natural justi 7.4 We also find force in the contention of the assessee that the statements relied upon merely describe a general modus operandi allegedly followed by the Nirav Modi group. None of the statements specifically attribute any cash payment to the assessee contrary, there are apparent inconsistencies in the material relied upon, including the fact that Ms. Aparna Chudasama, who stated that she joined the group only in January 2015, is shown as the sales person for transactions allegedly undertaken i Ms Chudsama is saying that cash transa whereas. We note that there is a contradiction in the statement of Priyanka Sandeep Runwal to the assessee beyond selective extracts reproduced in the assessment order. The assessee was thus deprived of a fair and effective opportunity to rebut the material relied upon by the It is well settled that where an addition is substantially or exclusively on third-party statements and untested material, denial of an opportunity to cross-examine such witnesses results in a serious procedural infirmity. In such circumstances, party statements, without affording the assessee a reasonable opportunity to test their veracity, cannot be accepted as conclusive proof of the alleged transaction. Any addition made on such a foundation is liable to be struck down as being violative of the principles of natural justice. We also find force in the contention of the assessee that the statements relied upon merely describe a general modus operandi allegedly followed by the Nirav Modi group. None of the statements specifically attribute any cash payment to the assessee contrary, there are apparent inconsistencies in the material relied upon, including the fact that Ms. Aparna Chudasama, who stated that she joined the group only in January 2015, is shown as the sales person for transactions allegedly undertaken in the year 2013. Ms Chudsama is saying that cash transaction were not recorded We note that there is a contradiction in the statement of Priyanka Sandeep Runwal 19 ITA No. 6524, 6522 & 6523/MUM/2024 to the assessee beyond selective extracts reproduced in the assessment order. The assessee was thus deprived of a fair and effective opportunity to rebut the material relied upon by the It is well settled that where an addition is founded party statements and untested examine such witnesses results in a serious procedural infirmity. In such circumstances, ording the assessee a reasonable opportunity to test their veracity, cannot be accepted as conclusive proof of the alleged transaction. Any addition made on such a foundation is liable to be struck down as being violative of We also find force in the contention of the assessee that the statements relied upon merely describe a general modus operandi allegedly followed by the Nirav Modi group. None of the statements specifically attribute any cash payment to the assessee. On the contrary, there are apparent inconsistencies in the material relied upon, including the fact that Ms. Aparna Chudasama, who stated that she joined the group only in January 2015, is shown as the n the year 2013. ction were not recorded We note that there is a contradiction in the statement of Printed from counselvise.com the employees Ms. Aparna Chudasma and statement of Shri Sourabh Jitendra Shah. Ms. Aparna Chudasma said that sales were not recorded in books whereas, Shri Sourabh Jitendra Shah is saying all such cash transactions were duly accounted in the books of accounts. the credibility of the evidence relied upon by the Assessin 7.5 The Assessing Officer has also not brought on record any independent corroborative material to establish that the assessee, in fact, purchased jewellery in cash. There is no evidence of delivery of jewellery, no trail of funds, no recovery from the assessee Assessing Officer has nowhere referred to any finding from the assessments in the case of Nirav Modi that all such cash sales were not entered into the books of accounts of their group and stock was reduced by way of branch transfer, to support his c Assessing Officer has only relied on the statement of the employees of Nirav Modi group. uncorroborated third 7.6 It is trite law that while income governed by the strict rules of the Indian Evidence Act, the basic requirements of fairness and natural justice cannot be dispensed with. Furnishing of material relied upon and affording an opportunity to effectively rebut and test such material, including by way of cross-examination where facts are disputed, are not empty Priyanka Sandeep Runwal the employees Ms. Aparna Chudasma and statement of Shri Sourabh Jitendra Shah. Ms. Aparna Chudasma said that sales were not recorded in books whereas, Shri Sourabh Jitendra Shah is saying all such cash transactions were duly accounted in the books of accounts. Such discrepancies materially undermine the credibility of the evidence relied upon by the Assessin he Assessing Officer has also not brought on record any independent corroborative material to establish that the assessee, in fact, purchased jewellery in cash. There is no evidence of delivery of jewellery, no trail of funds, no recovery from the assessee Assessing Officer has nowhere referred to any finding from the assessments in the case of Nirav Modi that all such cash sales were not entered into the books of accounts of their group and stock was reduced by way of branch transfer, to support his c Assessing Officer has only relied on the statement of the employees of Nirav Modi group. The addition thus rests solely on uncorroborated third-party statements. It is trite law that while income-tax proceedings are not e strict rules of the Indian Evidence Act, the basic requirements of fairness and natural justice cannot be dispensed with. Furnishing of material relied upon and affording an opportunity to effectively rebut and test such material, including by examination where facts are disputed, are not empty Priyanka Sandeep Runwal 20 ITA No. 6524, 6522 & 6523/MUM/2024 the employees Ms. Aparna Chudasma and statement of Shri Sourabh Jitendra Shah. Ms. Aparna Chudasma said that cash sales were not recorded in books whereas, Shri Sourabh Jitendra Shah is saying all such cash transactions were duly accounted in Such discrepancies materially undermine the credibility of the evidence relied upon by the Assessing Officer. he Assessing Officer has also not brought on record any independent corroborative material to establish that the assessee, in fact, purchased jewellery in cash. There is no evidence of delivery of jewellery, no trail of funds, no recovery from the assessee. The Assessing Officer has nowhere referred to any finding from the assessments in the case of Nirav Modi that all such cash sales were not entered into the books of accounts of their group and stock was reduced by way of branch transfer, to support his contentions. The Assessing Officer has only relied on the statement of the employees The addition thus rests solely on tax proceedings are not e strict rules of the Indian Evidence Act, the basic requirements of fairness and natural justice cannot be dispensed with. Furnishing of material relied upon and affording an opportunity to effectively rebut and test such material, including by examination where facts are disputed, are not empty Printed from counselvise.com formalities but constitute fundamental facets of fair procedure and are integral to the principles of Natural Justice embedded in the scheme of the Act. 7.9 In the absence of any corroborative material connecting the assessee with the alleged cash payment, and in the absence of cross-examination of the person whose statement is relied upon, the addition rests on suspicion and presumption rather than proof. 7.10 Even mere furnishing of copies of does not, by itself, satisfy the requirement of natural justice such material is sought to be used adversely against an assessee and the assessee specifically disputes its correctness. This approach conflates disclosure of m which are legally distinct concepts. The alleged financial year wise list of customers along with amount and the linkage of the assessee to such entries emanate entirely from statement of Ms Chudsama. The digital material statement is not collateral or incidental evidence but the foundation of the addition. Much emphasis has been placed by the lower authorities on the proposition that income are not governed by the strict provisions of the Indian Evidence Act. There can be no quarrel with this settled proposition. However, it equally settled that Priyanka Sandeep Runwal but constitute fundamental facets of fair procedure and are integral to the principles of Natural Justice embedded in the In the absence of any corroborative material connecting the assessee with the alleged cash payment, and in the examination of the person whose statement is relied upon, the addition rests on suspicion and presumption rather mere furnishing of copies of statements or documents does not, by itself, satisfy the requirement of natural justice such material is sought to be used adversely against an assessee and the assessee specifically disputes its correctness. This disclosure of material with testing of material which are legally distinct concepts. The alleged financial year wise list of customers along with amount and the linkage of the assessee to such entries emanate entirely from statement of Ms Chudsama. The digital material does not speak for itself. Consequently, the statement is not collateral or incidental evidence but the of the addition. Much emphasis has been placed by the lower authorities on the proposition that income-tax proceedings are not governed by the strict provisions of the Indian Evidence Act. There can be no quarrel with this settled proposition. However, it equally settled that relaxation of evidentiary rules does not imply Priyanka Sandeep Runwal 21 ITA No. 6524, 6522 & 6523/MUM/2024 but constitute fundamental facets of fair procedure and are integral to the principles of Natural Justice embedded in the In the absence of any corroborative material directly connecting the assessee with the alleged cash payment, and in the examination of the person whose statement is relied upon, the addition rests on suspicion and presumption rather statements or documents does not, by itself, satisfy the requirement of natural justice, where such material is sought to be used adversely against an assessee and the assessee specifically disputes its correctness. This testing of material, which are legally distinct concepts. The alleged financial year wise list of customers along with amount and the linkage of the assessee to such entries emanate entirely from statement of Ms Chudsama. does not speak for itself. Consequently, the statement is not collateral or incidental evidence but the very of the addition. Much emphasis has been placed by the tax proceedings are not governed by the strict provisions of the Indian Evidence Act. There can be no quarrel with this settled proposition. However, it is relaxation of evidentiary rules does not imply Printed from counselvise.com abrogation of natural justice admissible must still satisfy the minimum requirement of fairness when used against an assessee. The Hon’ble Supreme Cou Kishinchand Chellaram v. CIT that any material collected behind the back of the assessee, if proposed to be used against him, must be subjected to an opportunity of rebuttal in a meaningful manner includes cross-examination where facts are disputed. 7.11 It is trite law that as conclusive evidence against another, unless the latter is afforded an opportunity to test and rebut such admission not estopped from disputing the correctness or applicability of such admission to his case, particularly when the alleged payment is denied and no independent corroboration exists. 7.12 We are also unable to concur with the approach adopted by the Ld. CIT(A). The Ld. CIT(A) proceeded on the premise that reproduction of selective portions of the statements of Ms. Aparna Chudasama, Shri Saurabh Shah and Ms. Reshma Verma in the assessment order was sufficient compliance with the requirements of natural justice. In our considered view, mere reproduction of selective portions of third does not amount to furnishing the material to the assessee. The assessee was entitled to complete and authenticated copies of the Priyanka Sandeep Runwal abrogation of natural justice. Even material which is otherwise admissible must still satisfy the minimum requirement of fairness when used against an assessee. The Hon’ble Supreme Cou Kishinchand Chellaram v. CIT (125 ITR 713) has unequivocally held any material collected behind the back of the assessee, if proposed to be used against him, must be subjected to an opportunity of rebuttal in a meaningful manner, which necessari examination where facts are disputed. It is trite law that an admission by one party cannot be used as conclusive evidence against another, unless the latter is afforded an opportunity to test and rebut such admission. The assessee not estopped from disputing the correctness or applicability of such admission to his case, particularly when the alleged payment is denied and no independent corroboration exists. We are also unable to concur with the approach adopted by IT(A). The Ld. CIT(A) proceeded on the premise that reproduction of selective portions of the statements of Ms. Aparna Chudasama, Shri Saurabh Shah and Ms. Reshma Verma in the assessment order was sufficient compliance with the requirements ice. In our considered view, mere reproduction of selective portions of third-party statements in the assessment order does not amount to furnishing the material to the assessee. The assessee was entitled to complete and authenticated copies of the Priyanka Sandeep Runwal 22 ITA No. 6524, 6522 & 6523/MUM/2024 . Even material which is otherwise admissible must still satisfy the minimum requirement of fairness when used against an assessee. The Hon’ble Supreme Court in (125 ITR 713) has unequivocally held any material collected behind the back of the assessee, if proposed to be used against him, must be subjected to an , which necessarily examination where facts are disputed. an admission by one party cannot be used as conclusive evidence against another, unless the latter is afforded . The assessee is not estopped from disputing the correctness or applicability of such admission to his case, particularly when the alleged payment is We are also unable to concur with the approach adopted by IT(A). The Ld. CIT(A) proceeded on the premise that reproduction of selective portions of the statements of Ms. Aparna Chudasama, Shri Saurabh Shah and Ms. Reshma Verma in the assessment order was sufficient compliance with the requirements ice. In our considered view, mere reproduction of party statements in the assessment order does not amount to furnishing the material to the assessee. The assessee was entitled to complete and authenticated copies of the Printed from counselvise.com statements relied upon, so as to effectively understand, rebut and test the material forming the basis of the addition. Admittedly, such statements were never supplied in full to the assessee. 7.13 The reliance placed by the Ld. CIT(A) on the statements of the aforesaid employees to uphold the addition is also misplaced. A careful reading of the statements reveals that they merely describe a general modus operandi allegedly followed by the Nirav Modi group in accepting cash against jewellery sales. None of the statements specifically name the assessee or unequivocally assert that the assessee made any cash payment towards purchase of jewellery. Generalised statements regarding business practices of a third party, without direct attribution to the assessee, cannot constitute substantive evidence to fasten tax liability upon her. 7.14 The Ld. CIT(A) further erred in invoking the ratio of the judgment of the Hon’ble Supreme Court in v. State of Madras (supra) criminal jurisprudence and deals with the sufficiency of evidence for sustaining a conviction. The issue in the present case is not the numerical sufficiency of witnesses, but the denial of an opportunity to test the veracity of third Revenue. The principle laid down in inapplicable to the facts of the present case. Priyanka Sandeep Runwal nts relied upon, so as to effectively understand, rebut and test the material forming the basis of the addition. Admittedly, such statements were never supplied in full to the assessee. The reliance placed by the Ld. CIT(A) on the statements of the aforesaid employees to uphold the addition is also misplaced. A careful reading of the statements reveals that they merely describe a general modus operandi allegedly followed by the Nirav Modi group in accepting cash against jewellery sales. None of the tatements specifically name the assessee or unequivocally assert that the assessee made any cash payment towards purchase of jewellery. Generalised statements regarding business practices of a third party, without direct attribution to the assessee, cannot constitute substantive evidence to fasten tax liability upon her. The Ld. CIT(A) further erred in invoking the ratio of the judgment of the Hon’ble Supreme Court in Vadivelu Thevar & Anr. (supra). The said decision arose in the con criminal jurisprudence and deals with the sufficiency of evidence for sustaining a conviction. The issue in the present case is not the numerical sufficiency of witnesses, but the denial of an opportunity to test the veracity of third-party statements relied upon by the Revenue. The principle laid down in Vadivelu Thevar inapplicable to the facts of the present case. Priyanka Sandeep Runwal 23 ITA No. 6524, 6522 & 6523/MUM/2024 nts relied upon, so as to effectively understand, rebut and test the material forming the basis of the addition. Admittedly, such statements were never supplied in full to the assessee. The reliance placed by the Ld. CIT(A) on the statements of the aforesaid employees to uphold the addition is also misplaced. A careful reading of the statements reveals that they merely describe a general modus operandi allegedly followed by the Nirav Modi group in accepting cash against jewellery sales. None of the tatements specifically name the assessee or unequivocally assert that the assessee made any cash payment towards purchase of jewellery. Generalised statements regarding business practices of a third party, without direct attribution to the assessee, cannot constitute substantive evidence to fasten tax liability upon her. The Ld. CIT(A) further erred in invoking the ratio of the Vadivelu Thevar & Anr. The said decision arose in the context of criminal jurisprudence and deals with the sufficiency of evidence for sustaining a conviction. The issue in the present case is not the numerical sufficiency of witnesses, but the denial of an opportunity nts relied upon by the Vadivelu Thevar is, therefore, Printed from counselvise.com 7.15 Similarly, reliance on the decision in v. Ramjee (supra) is misconceived. While it is true principles of natural justice are flexible, such flexibility cannot be stretched to legitimise denial of a fundamental procedural safeguard where the addition is founded substantially on third party material. The right to confront and cross witnesses, where their statements form the sole or primary basis of an addition, is not a mere technicality but an integral component of fair procedure. 7.16 The observations of the Ld. CIT(A) based on the decision in Hersh W. Chadha v. DDIT(sup preponderance of probabilities also do not advance the case of the Revenue. In the present case, the assessee has consistently denied the alleged transaction and has specifically sought the material relied upon as well witnesses. In the absence of any independent corroborative evidence such as cash receipt signed by assessee jewellery, flow of funds or recovery from the assessee, the burden could not be said to have sh third-party statements. 7.17 The proposition that income the strict rules of the Indian Evidence Act, as relied upon by the Ld. CIT(A) with reference to Priyanka Sandeep Runwal Similarly, reliance on the decision in Chairman, Mining Board is misconceived. While it is true principles of natural justice are flexible, such flexibility cannot be stretched to legitimise denial of a fundamental procedural safeguard where the addition is founded substantially on third party material. The right to confront and cross-examin witnesses, where their statements form the sole or primary basis of an addition, is not a mere technicality but an integral component of The observations of the Ld. CIT(A) based on the decision in Hersh W. Chadha v. DDIT(supra) regarding the burden of proof and preponderance of probabilities also do not advance the case of the Revenue. In the present case, the assessee has consistently denied the alleged transaction and has specifically sought the material relied upon as well as an opportunity to cross witnesses. In the absence of any independent corroborative cash receipt signed by assessee jewellery, flow of funds or recovery from the assessee, the burden could not be said to have shifted merely on the basis of untested party statements. The proposition that income-tax authorities are not bound by the strict rules of the Indian Evidence Act, as relied upon by the Ld. CIT(A) with reference to Jay Engg. Works Ltd. and Metal P Priyanka Sandeep Runwal 24 ITA No. 6524, 6522 & 6523/MUM/2024 Chairman, Mining Board is misconceived. While it is true that the principles of natural justice are flexible, such flexibility cannot be stretched to legitimise denial of a fundamental procedural safeguard where the addition is founded substantially on third- examine adverse witnesses, where their statements form the sole or primary basis of an addition, is not a mere technicality but an integral component of The observations of the Ld. CIT(A) based on the decision in regarding the burden of proof and preponderance of probabilities also do not advance the case of the Revenue. In the present case, the assessee has consistently denied the alleged transaction and has specifically sought the material as an opportunity to cross-examine the witnesses. In the absence of any independent corroborative cash receipt signed by assessee, delivery of jewellery, flow of funds or recovery from the assessee, the burden ifted merely on the basis of untested tax authorities are not bound by the strict rules of the Indian Evidence Act, as relied upon by the Ld. Metal Products of Printed from counselvise.com India (supra), is well settled. However, this principle does not dispense with the obligation to follow the principles of natural justice. Material collected behind the back of the assessee may be used only after affording the assessee a fair an opportunity to rebut the same. That essential requirement has not been satisfied in the present case. 7.18 The reliance placed on to sustain the addition on the ground that the transaction did not appear to be genuine is also misplaced. Suspicion, howsoever strong, cannot take the place of proof. In the absence of any cogent material directly linking the assessee with the alleged cash purchase of jewellery, the addition cannot be sustained merely on conjectures drawn from the conduct of a third party. 7.19 With respect to the finding that the right of cross is not absolute, there can be no quarrel with the proposition in abstract. However, the judicial authorities relied upon by the Ld. CIT(A), including Chhabra(supra) and materially different statutory contexts. The Hon’ble Supreme Court in Andaman Timber Industries v. CCE where statements of third parties are relied upon and such statements are not subjected to cross request, the resulting order stands vitiated. In the present case, Priyanka Sandeep Runwal , is well settled. However, this principle does not dispense with the obligation to follow the principles of natural justice. Material collected behind the back of the assessee may be used only after affording the assessee a fair an opportunity to rebut the same. That essential requirement has not been satisfied in the present case. The reliance placed on ITC Classic Finance Ltd. v. DCIT(supra) to sustain the addition on the ground that the transaction did not to be genuine is also misplaced. Suspicion, howsoever strong, cannot take the place of proof. In the absence of any cogent material directly linking the assessee with the alleged cash purchase of jewellery, the addition cannot be sustained merely on tures drawn from the conduct of a third party. With respect to the finding that the right of cross is not absolute, there can be no quarrel with the proposition in abstract. However, the judicial authorities relied upon by the Ld. including Kanungo & Co.(supra), and Telestar Travels Pvt. Ltd.(supra) materially different statutory contexts. The Hon’ble Supreme Court Andaman Timber Industries v. CCE (supra)has clearly held that s of third parties are relied upon and such statements are not subjected to cross-examination despite a specific request, the resulting order stands vitiated. In the present case, Priyanka Sandeep Runwal 25 ITA No. 6524, 6522 & 6523/MUM/2024 , is well settled. However, this principle does not dispense with the obligation to follow the principles of natural justice. Material collected behind the back of the assessee may be used only after affording the assessee a fair and effective opportunity to rebut the same. That essential requirement has not ITC Classic Finance Ltd. v. DCIT(supra) to sustain the addition on the ground that the transaction did not to be genuine is also misplaced. Suspicion, howsoever strong, cannot take the place of proof. In the absence of any cogent material directly linking the assessee with the alleged cash purchase of jewellery, the addition cannot be sustained merely on tures drawn from the conduct of a third party. With respect to the finding that the right of cross-examination is not absolute, there can be no quarrel with the proposition in abstract. However, the judicial authorities relied upon by the Ld. , Surjeet Singh Telestar Travels Pvt. Ltd.(supra), arose in materially different statutory contexts. The Hon’ble Supreme Court (supra)has clearly held that s of third parties are relied upon and such examination despite a specific request, the resulting order stands vitiated. In the present case, Printed from counselvise.com prejudice to the assessee is writ large, as the impugned addition rests almost entirely on such untested statements. 7.20 The Ld. CIT(A) also failed to address the legal infirmity in applying the presumption under sections 132(4A) and 292C of the Act against the assessee. The presumption under the said provisions operates primaril possession the material is seized and cannot be automatically extended to a third party without independent corroboration. 7.21 In view of the above, we hold that the Ld. CIT(A) erred in upholding the addition by overlooking the assessment proceedings. The addition is based on third statements and digital material which were neither furnished to the assessee nor tested by way of cross unsupported by independent corroborati order, therefore, cannot be sustained in law. 7.22 In view of the foregoing discussion, we hold that the addition of ₹56,00,000/- sustained by the Ld. CIT(A) is vitiated by a clear breach of the principles of natural justice and reliable and corroborative evidence. The impugned addition, therefore, cannot be sustained in law. Priyanka Sandeep Runwal prejudice to the assessee is writ large, as the impugned addition st entirely on such untested statements. The Ld. CIT(A) also failed to address the legal infirmity in applying the presumption under sections 132(4A) and 292C of the Act against the assessee. The presumption under the said provisions operates primarily against the person from whose possession the material is seized and cannot be automatically extended to a third party without independent corroboration. In view of the above, we hold that the Ld. CIT(A) erred in upholding the addition by overlooking the fundamental defects in the assessment proceedings. The addition is based on third statements and digital material which were neither furnished to the assessee nor tested by way of cross-examination, and are unsupported by independent corroborative evidence. The impugned order, therefore, cannot be sustained in law. In view of the foregoing discussion, we hold that the addition sustained by the Ld. CIT(A) is vitiated by a clear breach of the principles of natural justice and is unsupported by reliable and corroborative evidence. The impugned addition, therefore, cannot be sustained in law. Priyanka Sandeep Runwal 26 ITA No. 6524, 6522 & 6523/MUM/2024 prejudice to the assessee is writ large, as the impugned addition The Ld. CIT(A) also failed to address the legal infirmity in applying the presumption under sections 132(4A) and 292C of the Act against the assessee. The presumption under the said y against the person from whose possession the material is seized and cannot be automatically extended to a third party without independent corroboration. In view of the above, we hold that the Ld. CIT(A) erred in the fundamental defects in the assessment proceedings. The addition is based on third-party statements and digital material which were neither furnished to the examination, and are ve evidence. The impugned In view of the foregoing discussion, we hold that the addition sustained by the Ld. CIT(A) is vitiated by a clear is unsupported by reliable and corroborative evidence. The impugned addition, Printed from counselvise.com 7.23 Accordingly, the addition made by the Assessing Officer and confirmed by the Ld. CIT(A) is deleted. The grounds raised by the assessee on merits are allowed 8. The remaining two years from assessment year 2015 2016-17 having identical facts and circumstances, the respective grounds raised in those appeals are decided mutatis mutandis. 9. In the result, all the three appeals of t allowed. Order pronounced in the open Court on Sd/- (ANIKESH BANERJEE JUDICIAL MEMBER Mumbai; Dated: 23/12/2025 Dragon Legal/Rahul Sharma, Sr. P.S. Copy of the Order forwarded 1. The Appellant 2. The Respondent. 3. CIT 4. DR, ITAT, Mumbai 5. Guard file. //True Copy// Priyanka Sandeep Runwal Accordingly, the addition made by the Assessing Officer and confirmed by the Ld. CIT(A) is deleted. The grounds raised by the on merits are allowed. The remaining two years from assessment year 2015 17 having identical facts and circumstances, the respective grounds raised in those appeals are decided mutatis mutandis. In the result, all the three appeals of the assessee are partly ounced in the open Court on 23/12/2025. Sd/ (ANIKESH BANERJEE) (OM PRAKASH KANT JUDICIAL MEMBER ACCOUNTANT MEMBER Copy of the Order forwarded to : BY ORDER, (Assistant Registrar) ITAT, Mumbai Priyanka Sandeep Runwal 27 ITA No. 6524, 6522 & 6523/MUM/2024 Accordingly, the addition made by the Assessing Officer and confirmed by the Ld. CIT(A) is deleted. The grounds raised by the The remaining two years from assessment year 2015-16 and 17 having identical facts and circumstances, the respective grounds raised in those appeals are decided mutatis mutandis. he assessee are partly /12/2025. Sd/- OM PRAKASH KANT) ACCOUNTANT MEMBER BY ORDER, (Assistant Registrar) ITAT, Mumbai Printed from counselvise.com "