TMI Blog2008 (9) TMI 619X X X X Extracts X X X X X X X X Extracts X X X X ..... P-74, Ganpati Chamber, Bhatton Ki Gali, Opp. Hawa Mahal, Jaipur. ( ii ) M/s. Mine O Gem, Rs. 1,15,56,857 115-Vardhman, Johri Bazar, Jaipur. It is stated in the assessment order that investigation revealed that the alleged sellers were running a racket for arranging entries of import and export and for providing bogus bills. The revenue authorities carried investigations and found that M/s. Vinayak Overseas was owned by one Shri Gauri Shanker Pareek who had given power of attorney in favour of Shri Mohan Sharma. The revenue authorities took action under section 132 in the case of Vinayk Overseas and found that he was not operating from the address given by him. His income-tax records showed that he had filed some return at Surat but he was also not found at the address given in the return. The premises in Surat was found to be under the seal of D.R.I. Shri Mohan Sharma in his statement recorded on 8-7-2003 was unable to give whereabouts of Shri Gauri Shanker, except stating that he was staying at Bombay. He further accepted in his statement th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r Pareek and Sanjay Pareek are to be used against the assessee then an opportunity of cross examination may be provided to the assessee. 5. The Assessing Officer, after going through the reply of the assessee concluded that the story of purchase and export of diamonds was not believable and made addition of Rs. 4,29,74,424 under section 68 of the Income-tax Act, for the following reasons: ( i )That Director of the assessee company had no experience in export and it was unlikely that even in the first year they will get huge order for export without making a foreign visit. ( ii )That Director had no study of foreign markets and alleged claim that agents of importers had come and met in India, cannot be accepted as directors could not identify the agents who have allegedly met the Directors of assessee company. ( iii )The parties from whom purchases are said to have been made are themselves shown to be exporters of Gem/Diamonds. It is surprising that those parties did not export on their own behalf when margin of profit was so high but did it on behalf of the assessee. The Assessing Officer was referring to some documents where export was found to have been directly carried ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... held bogus, so the sales were also treated as bogus and accordingly provisions of section 68 were applied to credit entries of the export. All the material collected by the assessee was used in violation of principle of natural justice. The assessee was never allowed any opportunity to cross examine the witnesses like Shri Gauri Shanker or Shri Sanjay Pareek. At any rate, when exports are genuine and when amount was received from abroad through the banking channel, there is no question of application of section 68 of the Income-tax Act, particularly when genuineness of export and receipt of amount from abroad had not been doubted. It was accordingly submitted that addition made be deleted. A copy of note sheet containing objections raised by the Assessing Officer and assessee s reply was filed on record. Our attention was also drawn to the bank statement and other documents through which amount in question was received and credited in the books of account of the assessee. 9. The learned Departmental Representative opposed above submissions and relied upon orders of the revenue authorities. 10. We have given careful thought to the rival submissions of the parties. As is clea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l objection of the assessee that material used against the assessee was not put to the assessee in accordance with law. 11. Now to answer the first and the main question relating to the application of section 68, we deem it appropriate to reproduce the said provision: "68. Cash credits. Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year." It is not the case of the assessee that above provision is not applicable to alleged sale receipts. Sale receipt can be treated like any other credit and assessee called upon to explain the nature and source of such receipt. It is now well-settled law that for explaining cash credit the assessee has to establish three things: ( i )Genuineness of the entry of credit, ( ii )Identity of the creditors, and ( iii )The creditworthiness of the creditor. The burden to show that all the three conditions/characteristics are satis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated as bogus as purchases were bogus and assessee was dealing with people indulging in giving Hawala entries only. This was done without examining the nature of the credit entries and without providing reasonable opportunity to the assessee to explain those credit entries. The explanation of the assessee relating to the credit entries has not been examined at all. There is no doubt that burden of proof to prove that credit entries are genuine, is on the assessee. But the question of discharge of burden is required to be decided on examination and appraisal of material available on record. The present case was decided without such an appraisal and without considering the question with reference to material relating to the credit entries. We have held above that reasonable opportunity was not afforded to the assessee as, in our opinion, certain statements recorded at the back of the assessee have been relied upon without putting those statements to the assessee and without considering his request to cross-examine those witnesses used by the revenue. 13. In the light of above discussion, we are of view that this case should be remitted back to the Assessing Officer for re-examina ..... X X X X Extracts X X X X X X X X Extracts X X X X
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